Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index returned about 5.2% during the last 12 months ending October 30, 2015. Less than 49% of the stocks in the index outperformed the index. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 30 S&P 500 stocks among hedge funds at the end of September 2014 had an average return of 9.5% during the same period. Sixty three percent of these 30 stocks outperformed the market. Hedge funds had bad stock picks like everyone else. Micron, which lost 50% over this period, was one of hedge funds’ 30 favorite S&P 500 stocks. Anadarko Petroleum was another failed stock pick which lost more than 26%. So, taking cues from hedge funds isn’t a foolproof strategy, but it seems to work on average. In this article, we will take a look at what hedge funds think about Comstock Resources Inc (NYSE:CRK).
Comstock Resources shareholders have witnessed a decrease in hedge fund interest in recent months. CRK was in 7 hedge funds’ portfolios at the end of September. There were 9 hedge funds in our database with CRK positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as PRGX Global Inc (NASDAQ:PRGX), Camtek LTD. (NASDAQ:CAMT), and Frequency Electronics, Inc. (NASDAQ:FEIM) to gather more data points.
Follow Comstock Resources Inc (NYSE:CRK)
Follow Comstock Resources Inc (NYSE:CRK)
At the moment there are many tools stock market investors have at their disposal to appraise publicly traded companies. A couple of the less known tools are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the elite hedge fund managers can outclass their index-focused peers by a significant amount (see the details here).
Keeping this in mind, we’re going to analyze the recent action encompassing Comstock Resources Inc (NYSE:CRK).
How are hedge funds trading Comstock Resources Inc (NYSE:CRK)?
Heading into Q4, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, John Kim’s Karamaan Group has the most valuable position in Comstock Resources Inc (NYSE:CRK), worth close to $1.4 million, comprising 1.5% of its total 13F portfolio. Sitting at the No. 2 spot is D E Shaw, managed by D. E. Shaw, which holds a $1.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish comprise Israel Englander’s Millennium Management, Sander Gerber’s Hudson Bay Capital Management and Ken Griffin’s Citadel Investment Group.
Seeing as Comstock Resources Inc (NYSE:CRK) has faced falling interest from hedge fund managers, we can see that there were a few funds who were dropping their positions entirely heading into Q4. Intriguingly, Chuck Royce’s Royce & Associates dumped the largest stake of the 700 funds watched by Insider Monkey, comprising an estimated $2.2 million in stock, and Robert Vollero and Gentry T. Beach’s Vollero Beach Capital Partners was right behind this move, as the fund cut about $1.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks similar to Comstock Resources Inc (NYSE:CRK). These stocks are PRGX Global Inc (NASDAQ:PRGX), Camtek LTD. (NASDAQ:CAMT), Frequency Electronics, Inc. (NASDAQ:FEIM), and DT Asia Investments Ltd (NASDAQ:CADTU). This group of stocks’ market caps are closest to CRK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PRGX | 13 | 22555 | -1 |
| CAMT | 4 | 4522 | 1 |
| FEIM | 5 | 5854 | -1 |
| CADTU | 5 | 14209 | 1 |
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $12 million, compared to just $4 million in CRK’s case. PRGX Global Inc (NASDAQ:PRGX) is the most popular stock in this table. On the other hand Camtek LTD. (NASDAQ:CAMT) is the least popular one with only 4 bullish hedge fund positions. Comstock Resources Inc (NYSE:CRK) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PRGX might be a better candidate to consider a long position.
