It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 8 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in PDC Energy Inc (NASDAQ:PDCE).
Is PDC Energy Inc (NASDAQ:PDCE) a buy, sell, or hold? Hedge funds are in a bullish mood. The number of bullish hedge fund bets moved up by 9 lately. Our calculations also showed that PDCE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). PDCE was in 23 hedge funds’ portfolios at the end of the third quarter of 2019. There were 14 hedge funds in our database with PDCE holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most market participants, hedge funds are viewed as unimportant, old investment vehicles of years past. While there are over 8000 funds trading today, We look at the crème de la crème of this club, about 750 funds. It is estimated that this group of investors watch over most of the hedge fund industry’s total capital, and by tracking their finest picks, Insider Monkey has deciphered a number of investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Didric Cederholm of Lion Point Capital
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to view the latest hedge fund action regarding PDC Energy Inc (NASDAQ:PDCE).
How are hedge funds trading PDC Energy Inc (NASDAQ:PDCE)?
At the end of the third quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 64% from the second quarter of 2019. By comparison, 19 hedge funds held shares or bullish call options in PDCE 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.
Among these funds, Citadel Investment Group held the most valuable stake in PDC Energy Inc (NASDAQ:PDCE), which was worth $72.8 million at the end of the third quarter. On the second spot was Lion Point which amassed $32.2 million worth of shares. Millennium Management, Balyasny Asset Management, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Lion Point allocated the biggest weight to PDC Energy Inc (NASDAQ:PDCE), around 3.59% of its 13F portfolio. Divisar Capital is also relatively very bullish on the stock, designating 1.61 percent of its 13F equity portfolio to PDCE.
Consequently, specific money managers have jumped into PDC Energy Inc (NASDAQ:PDCE) headfirst. Millennium Management, managed by Israel Englander, assembled the biggest position in PDC Energy Inc (NASDAQ:PDCE). Millennium Management had $25.9 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $14.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Till Bechtolsheimer’s Arosa Capital Management, David Rosen’s Rubric Capital Management, and Matthew Halbower’s Pentwater Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as PDC Energy Inc (NASDAQ:PDCE) but similarly valued. These stocks are Zogenix, Inc. (NASDAQ:ZGNX), NGL Energy Partners LP (NYSE:NGL), LexinFintech Holdings Ltd. (NASDAQ:LX), and Heartland Express, Inc. (NASDAQ:HTLD). All of these stocks’ market caps resemble PDCE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ZGNX | 34 | 834448 | 6 |
| NGL | 4 | 38721 | 0 |
| LX | 15 | 75258 | 0 |
| HTLD | 17 | 46403 | 4 |
| Average | 17.5 | 248708 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $249 million. That figure was $232 million in PDCE’s case. Zogenix, Inc. (NASDAQ:ZGNX) is the most popular stock in this table. On the other hand NGL Energy Partners LP (NYSE:NGL) is the least popular one with only 4 bullish hedge fund positions. PDC Energy Inc (NASDAQ:PDCE) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately PDCE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PDCE were disappointed as the stock returned -18.1% during the fourth quarter (through the end of November) 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.
