Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. At Insider Monkey, we pore over the filings of nearly 835 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not Crescent Point Energy Corp (NYSE:CPG) makes for a good investment right now.
Crescent Point Energy Corp (NYSE:CPG) was in 14 hedge funds’ portfolios at the end of the fourth quarter of 2019. CPG shareholders have witnessed an increase in hedge fund interest lately. There were 12 hedge funds in our database with CPG holdings at the end of the previous quarter. Our calculations also showed that CPG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a gander at the new hedge fund action encompassing Crescent Point Energy Corp (NYSE:CPG).
What have hedge funds been doing with Crescent Point Energy Corp (NYSE:CPG)?
Heading into the first quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CPG over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
The largest stake in Crescent Point Energy Corp (NYSE:CPG) was held by GLG Partners, which reported holding $17.1 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $13.2 million position. Other investors bullish on the company included Two Sigma Advisors, Arrowstreet Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Waratah Capital Advisors allocated the biggest weight to Crescent Point Energy Corp (NYSE:CPG), around 0.57% of its 13F portfolio. GLG Partners is also relatively very bullish on the stock, dishing out 0.06 percent of its 13F equity portfolio to CPG.
As industrywide interest jumped, some big names have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the biggest position in Crescent Point Energy Corp (NYSE:CPG). Arrowstreet Capital had $10.2 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $0.5 million position during the quarter. The only other fund with a brand new CPG position is Donald Sussman’s Paloma Partners.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Crescent Point Energy Corp (NYSE:CPG) but similarly valued. These stocks are Evertec Inc (NYSE:EVTC), Yelp Inc (NYSE:YELP), Columbia Property Trust Inc (NYSE:CXP), and Acushnet Holdings Corp. (NYSE:GOLF). This group of stocks’ market values are closest to CPG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EVTC | 19 | 270812 | -7 |
| YELP | 27 | 360550 | -2 |
| CXP | 22 | 123416 | 7 |
| GOLF | 16 | 22328 | 3 |
| Average | 21 | 194277 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $194 million. That figure was $73 million in CPG’s case. Yelp Inc (NYSE:YELP) is the most popular stock in this table. On the other hand Acushnet Holdings Corp. (NYSE:GOLF) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Crescent Point Energy Corp (NYSE:CPG) is even less popular than GOLF. Hedge funds dodged a bullet by taking a bearish stance towards CPG. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but managed to beat the market by 5.5 percentage points. Unfortunately CPG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CPG investors were disappointed as the stock returned -83.6% during the same time period 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 most of these stocks already outperformed the market so far in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
