North Carolina-based asset management firm Massif Capital, LLC released its second-quarter investor letter this month – a copy of which is available for download here. The fund is currently being co-managed by Will Thomson and Chip Russell. In their recent letter to investors, Massif Capital announced that the core portfolio was up 18.3% in the second quarter. In the first six months of 2020, the fund has returned 21.9%. You should check out Massif Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash.
In the said letter, Massif Capital highlighted a few stocks and Hess Corp (NYSE:HES) is one of them. Hess Corp (NYSE:HES) is engaged in the exploration and production of crude oil and natural gas. Year-to-date, Hess Corp (NYSE:HES) stock lost 32.5% and on July 9th it had a closing price of $44.68. Here is what Massif Capital said:
“Hess: We took a short position in Hess during the first quarter due to what we believed to be a weakness in their assertion that the Bakken would serve as a cash engine, along with their Gulf of Mexico assets, to pay for the development of their offshore Guyana fields. Our analysis suggested that not only was their fracking in the Bakken unprofitable but that it was unlikely ever to be so. The market very quickly told us that although we might be right in our analysis of the fundamentals, it did not care. We suspect that much of this has to do with the fact that Hess had hedged nearly 100% of their production in 2020 during the relatively high priced 2019 period, but we cannot be certain. Since we closed out the position, the stock has rallied a further 45%. We take this as directional evidence (perhaps) of a good decision. Hess contributed -0.19% to the portfolio during the quarter.
We have mostly avoided shorting oil companies in the last few years. The opportunity is appealing but extremely tricky to evaluate. Hess remains an interesting short. We have little confidence in the longterm viability of operations in the Bakken, and Hess remains a large player. Yet as the firm moves further along in their development and monetization of assets in Guyana, the weight of the Bakkens failure to play a meaningful role in producing positive free cash flow becomes increasingly difficult to determine by looking at the financials and perhaps less significant to the market. One thing that seems increasingly true of the environment we are investing in is that bad capital allocation by management teams can be easily forgiven if there is plenty of liquidity, even if access to liquid capital imperils long-term solvency.”
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In Q1 2020, the number of bullish hedge fund positions on Hess Corp (NYSE:HES) stock decreased by about 18% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with Hess’ upside potential. Our calculations showed that Hess Corp (NYSE:HES) isn’t ranked among the 30 most popular stocks among hedge funds.
The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
Video: Top 5 Stocks Among Hedge Funds
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. You can subscribe to our free enewsletter below to receive our stories in your inbox:
Disclosure: None. This article is originally published at Insider Monkey.
