“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Crescent Point Energy Corp (NYSE:CPG) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Crescent Point Energy Corp (NYSE:CPG) has seen an increase in activity from the world’s largest hedge funds lately. CPG was in 17 hedge funds’ portfolios at the end of the first quarter of 2019. There were 16 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s take a glance at the latest hedge fund action encompassing Crescent Point Energy Corp (NYSE:CPG).
What does smart money think about Crescent Point Energy Corp (NYSE:CPG)?
At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CPG over the last 15 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the most valuable position in Crescent Point Energy Corp (NYSE:CPG), worth close to $31.2 million, corresponding to 0.1% of its total 13F portfolio. Coming in second is D E Shaw, managed by D. E. Shaw, which holds a $14.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism comprise Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors, Steve Cohen’s Point72 Asset Management and Jim Simons’s Renaissance Technologies.
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Waratah Capital Advisors, managed by Brad Dunkley and Blair Levinsky, established the most outsized position in Crescent Point Energy Corp (NYSE:CPG). Waratah Capital Advisors had $8.9 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $5 million position during the quarter. The other funds with brand new CPG positions are David Costen Haley’s HBK Investments, Michael Platt and William Reeves’s BlueCrest Capital Mgmt., and John H Lewis’s Osmium Partners.
Let’s now take a look at 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 MaxLinear, Inc. (NYSE:MXL), Mueller Industries, Inc. (NYSE:MLI), Axos Financial, Inc. (NYSE:AX), and Summit Materials Inc (NYSE:SUM). 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 |
|---|---|---|---|
| MXL | 6 | 33874 | 1 |
| MLI | 13 | 184965 | 3 |
| AX | 13 | 61258 | -2 |
| SUM | 22 | 480411 | 2 |
| Average | 13.5 | 190127 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $190 million. That figure was $72 million in CPG’s case. Summit Materials Inc (NYSE:SUM) is the most popular stock in this table. On the other hand MaxLinear, Inc. (NYSE:MXL) is the least popular one with only 6 bullish hedge fund positions. Crescent Point Energy Corp (NYSE:CPG) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately CPG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CPG were disappointed as the stock returned -3.1% during the same 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.
