While the market driven by short-term sentiment influenced by uncertainty regarding the future of the interest rate environment in the US, declining oil prices and the trade war with China, many smart money investors kept their optimism regarding the current bull run in the fourth quarter, while still hedging many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Cimarex Energy Co (NYSE:XEC).
Is Cimarex Energy Co (NYSE:XEC) ready to rally soon? The smart money is getting more optimistic. The number of bullish hedge fund positions moved up by 5 in recent months. Our calculations also showed that XEC isn’t among the 30 most popular stocks among hedge funds. XEC was in 28 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 23 hedge funds in our database with XEC holdings at the end of the previous quarter.
According to most market participants, hedge funds are viewed as slow, old investment tools of yesteryear. While there are greater than 8000 funds in operation today, We look at the aristocrats of this group, about 750 funds. Most estimates calculate that this group of people control the lion’s share of the hedge fund industry’s total capital, and by following their finest equity investments, Insider Monkey has deciphered a few investment strategies that have historically exceeded the market. Insider Monkey’s flagship hedge fund strategy beat the S&P 500 index by nearly 5 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
We’re going to take a look at the new hedge fund action encompassing Cimarex Energy Co (NYSE:XEC).
Hedge fund activity in Cimarex Energy Co (NYSE:XEC)
At the end of the fourth quarter, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from the second quarter of 2018. On the other hand, there were a total of 34 hedge funds with a bullish position in XEC a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Cimarex Energy Co (NYSE:XEC) was held by Diamond Hill Capital, which reported holding $374.1 million worth of stock at the end of September. It was followed by International Value Advisers with a $284.6 million position. Other investors bullish on the company included Adage Capital Management, Bridgewater Associates, and Point72 Asset Management.
Now, some big names have jumped into Cimarex Energy Co (NYSE:XEC) headfirst. Deep Basin Capital, managed by Matt Smith, assembled the most outsized position in Cimarex Energy Co (NYSE:XEC). Deep Basin Capital had $36.9 million invested in the company at the end of the quarter. Wayne Cooperman’s Cobalt Capital Management also made a $9.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Jim Simons’s Renaissance Technologies, Matthew Tewksbury’s Stevens Capital Management, and Jonathan Barrett and Paul Segal’s Luminus Management.
Let’s check out hedge fund activity in other stocks similar to Cimarex Energy Co (NYSE:XEC). We will take a look at AptarGroup, Inc. (NYSE:ATR), American Homes 4 Rent (NYSE:AMH), Exelixis, Inc. (NASDAQ:EXEL), and Medical Properties Trust, Inc. (NYSE:MPW). This group of stocks’ market valuations are closest to XEC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ATR | 17 | 62626 | 4 |
| AMH | 18 | 430651 | -2 |
| EXEL | 24 | 668199 | 1 |
| MPW | 16 | 224506 | 6 |
| Average | 18.75 | 346496 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $346 million. That figure was $1081 million in XEC’s case. Exelixis, Inc. (NASDAQ:EXEL) is the most popular stock in this table. On the other hand Medical Properties Trust, Inc. (NYSE:MPW) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Cimarex Energy Co (NYSE:XEC) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Unfortunately XEC wasn’t in this group. Hedge funds that bet on XEC were disappointed as the stock returned 12.7% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 12 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
