Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Comstock Resources Inc (NYSE:CRK).
Is Comstock Resources Inc (NYSE:CRK) a superb investment right now? Investors who are in the know are taking an optimistic view. The number of bullish hedge fund positions moved up by 1 recently. Our calculations also showed that CRK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
At the moment there are a large number of tools stock market investors put to use to size up publicly traded companies. A pair of the less utilized tools are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the elite money managers can trounce the broader indices by a significant amount (see the details here).
David E. Shaw of D.E. Shaw
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to take a look at the new hedge fund action regarding Comstock Resources Inc (NYSE:CRK).
What does smart money think about Comstock Resources Inc (NYSE:CRK)?
At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CRK over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Comstock Resources Inc (NYSE:CRK) was held by Renaissance Technologies, which reported holding $1.7 million worth of stock at the end of September. It was followed by Arosa Capital Management with a $1.2 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and D E Shaw. In terms of the portfolio weights assigned to each position Arosa Capital Management allocated the biggest weight to Comstock Resources Inc (NYSE:CRK), around 0.21% of its 13F portfolio. Paloma Partners is also relatively very bullish on the stock, dishing out 0.0023 percent of its 13F equity portfolio to CRK.
As aggregate interest increased, specific money managers were breaking ground themselves. Arosa Capital Management, managed by Till Bechtolsheimer, assembled the most valuable position in Comstock Resources Inc (NYSE:CRK). Arosa Capital Management had $1.2 million invested in the company at the end of the quarter. David E. Shaw’s D E Shaw also initiated a $0.3 million position during the quarter. The only other fund with a new position in the stock is Donald Sussman’s Paloma Partners.
Let’s go over hedge fund activity in other stocks similar to Comstock Resources Inc (NYSE:CRK). We will take a look at National Research Corporation (NASDAQ:NRC), Supernus Pharmaceuticals Inc (NASDAQ:SUPN), Instructure, Inc. (NYSE:INST), and Akcea Therapeutics, Inc. (NASDAQ:AKCA). This group of stocks’ market values are closest to CRK’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NRC | 9 | 49867 | 0 |
| SUPN | 16 | 88106 | 0 |
| INST | 17 | 522274 | -4 |
| AKCA | 4 | 4811 | -4 |
| Average | 11.5 | 166265 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $166 million. That figure was $4 million in CRK’s case. Instructure, Inc. (NYSE:INST) is the most popular stock in this table. On the other hand Akcea Therapeutics, Inc. (NASDAQ:AKCA) is the least popular one with only 4 bullish hedge fund positions. Comstock Resources Inc (NYSE:CRK) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CRK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CRK investors were disappointed as the stock returned -18.5% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
