How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Contura Energy, Inc. (NYSE:CTRA).
Contura Energy, Inc. (NYSE:CTRA) was in 22 hedge funds’ portfolios at the end of June. CTRA shareholders have witnessed a decrease in support from the world’s most elite money managers of late. There were 32 hedge funds in our database with CTRA positions at the end of the previous quarter. Our calculations also showed that CTRA isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
At the moment there are numerous tools shareholders use to appraise publicly traded companies. A pair of the most useful tools are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the best fund managers can trounce their index-focused peers by a solid margin (see the details here).
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the latest hedge fund action surrounding Contura Energy, Inc. (NYSE:CTRA).
How are hedge funds trading Contura Energy, Inc. (NYSE:CTRA)?
At Q2’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CTRA over the last 16 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
More specifically, Whitebox Advisors was the largest shareholder of Contura Energy, Inc. (NYSE:CTRA), with a stake worth $118.5 million reported as of the end of March. Trailing Whitebox Advisors was Highbridge Capital Management, which amassed a stake valued at $70.3 million. Solus Alternative Asset Management, Melqart Asset Management, and Alta Fundamental Advisers were also very fond of the stock, giving the stock large weights in their portfolios.
Since Contura Energy, Inc. (NYSE:CTRA) has experienced a decline in interest from hedge fund managers, logic holds that there is a sect of fund managers that decided to sell off their entire stakes last quarter. It’s worth mentioning that Jason Mudrick’s Mudrick Capital Management cut the biggest investment of the “upper crust” of funds monitored by Insider Monkey, valued at close to $18.2 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dumped about $13.3 million worth. These moves are important to note, as total hedge fund interest dropped by 10 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Contura Energy, Inc. (NYSE:CTRA) but similarly valued. We will take a look at Pacific Biosciences of California, Inc. (NASDAQ:PACB), Gannett Co., Inc. (NYSE:GCI), Luminex Corporation (NASDAQ:LMNX), and Atara Biotherapeutics Inc (NASDAQ:ATRA). This group of stocks’ market values are similar to CTRA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PACB | 22 | 155804 | 3 |
| GCI | 14 | 121005 | -2 |
| LMNX | 17 | 147610 | -4 |
| ATRA | 12 | 377753 | -3 |
| Average | 16.25 | 200543 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $201 million. That figure was $377 million in CTRA’s case. Pacific Biosciences of California, Inc. (NASDAQ:PACB) is the most popular stock in this table. On the other hand Atara Biotherapeutics Inc (NASDAQ:ATRA) is the least popular one with only 12 bullish hedge fund positions. Contura Energy, Inc. (NYSE:CTRA) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CTRA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CTRA were disappointed as the stock returned -46.1% during the third 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
