Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by more than 6 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of California Resources Corporation (NYSE:CRC).
California Resources Corporation (NYSE:CRC) was in 15 hedge funds’ portfolios at the end of March. CRC has seen a decrease in hedge fund interest recently. There were 20 hedge funds in our database with CRC holdings at the end of the previous quarter. Our calculations also showed that CRC isn’t among the 30 most popular stocks among hedge funds.
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let’s take a gander at the fresh hedge fund action encompassing California Resources Corporation (NYSE:CRC).
How are hedge funds trading California Resources Corporation (NYSE:CRC)?
At Q1’s end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in CRC a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Masters Capital Management was the largest shareholder of California Resources Corporation (NYSE:CRC), with a stake worth $25.7 million reported as of the end of March. Trailing Masters Capital Management was D E Shaw, which amassed a stake valued at $25.6 million. Orbis Investment Management, Rima Senvest Management, and Crescent Park Management were also very fond of the stock, giving the stock large weights in their portfolios.
Because California Resources Corporation (NYSE:CRC) has experienced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of money managers who sold off their positions entirely in the third quarter. Intriguingly, Jim Simons’s Renaissance Technologies said goodbye to the biggest position of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $18.2 million in stock. Don Morgan’s fund, Brigade Capital, also cut its stock, about $5.9 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 5 funds in the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as California Resources Corporation (NYSE:CRC) but similarly valued. These stocks are BrightSphere Investment Group plc (NYSE:BSIG), Vicor Corp (NASDAQ:VICR), SRC Energy Inc. (NYSE:SRCI), and Tupperware Brands Corporation (NYSE:TUP). This group of stocks’ market values match CRC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BSIG | 21 | 365270 | -1 |
| VICR | 10 | 23874 | -5 |
| SRCI | 14 | 318271 | 0 |
| TUP | 23 | 170838 | 1 |
| Average | 17 | 219563 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $220 million. That figure was $141 million in CRC’s case. Tupperware Brands Corporation (NYSE:TUP) is the most popular stock in this table. On the other hand Vicor Corp (NASDAQ:VICR) is the least popular one with only 10 bullish hedge fund positions. California Resources Corporation (NYSE:CRC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately CRC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CRC investors were disappointed as the stock returned -29.2% 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
