It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Antero Resources Corp (NYSE:AR) during the quarter below.
Antero Resources Corp (NYSE:AR) investors should be aware of an increase in support from the world’s most elite money managers in recent months. Our calculations also showed that AR isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a glance at the fresh hedge fund action surrounding Antero Resources Corp (NYSE:AR).
How are hedge funds trading Antero Resources Corp (NYSE:AR)?
Heading into the first quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in AR over the last 14 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Antero Resources Corp (NYSE:AR) was held by Baupost Group, which reported holding $268.4 million worth of stock at the end of September. It was followed by SailingStone Capital Partners with a $233.7 million position. Other investors bullish on the company included FPR Partners, Brave Warrior Capital, and Millennium Management.
As industrywide interest jumped, specific money managers have jumped into Antero Resources Corp (NYSE:AR) headfirst. Laurion Capital Management, managed by Benjamin A. Smith, initiated the biggest position in Antero Resources Corp (NYSE:AR). Laurion Capital Management had $5.6 million invested in the company at the end of the quarter. Mike Vranos’s Ellington also made a $2 million investment in the stock during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors, David Costen Haley’s HBK Investments, and Alec Litowitz and Ross Laser’s Magnetar Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Antero Resources Corp (NYSE:AR) but similarly valued. These stocks are B2Gold Corp (NYSE:BTG), Gold Fields Limited (NYSE:GFI), Armstrong World Industries, Inc. (NYSE:AWI), and Ligand Pharmaceuticals Inc. (NASDAQ:LGND). All of these stocks’ market caps are closest to AR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BTG | 17 | 104860 | 3 |
| GFI | 9 | 160670 | -1 |
| AWI | 26 | 519892 | 4 |
| LGND | 24 | 532704 | -4 |
| Average | 19 | 329532 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $330 million. That figure was $920 million in AR’s case. Armstrong World Industries, Inc. (NYSE:AWI) is the most popular stock in this table. On the other hand Gold Fields Limited (NYSE:GFI) is the least popular one with only 9 bullish hedge fund positions. Antero Resources Corp (NYSE:AR) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately AR wasn’t nearly as popular as these 15 stock and hedge funds that were betting on AR were disappointed as the stock returned -14.4% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
