“Value has performed relatively poorly since the 2017 shift, but we believe challenges to the S&P 500’s dominance are mounting and resulting active opportunities away from the index are growing. At some point, this fault line will break, likely on the back of rising rates, and all investors will be reminded that the best time to diversify away from the winners is when it is most painful. The bargain of capturing long-term value may be short-term pain, but enough is eventually enough and it comes time to harvest the benefits.,” said Clearbridge Investments in its market commentary. We aren’t sure whether long-term interest rates will top 5% and 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 Comstock Resources Inc (NYSE:CRK) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Comstock Resources Inc (NYSE:CRK) was in 8 hedge funds’ portfolios at the end of December. CRK investors should be aware of an increase in support from the world’s most elite money managers lately. There were 5 hedge funds in our database with CRK positions at the end of the previous quarter. Our calculations also showed that crk 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 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 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.
We’re going to go over the latest hedge fund action surrounding Comstock Resources Inc (NYSE:CRK).
Hedge fund activity in Comstock Resources Inc (NYSE:CRK)
At Q4’s end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 60% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards CRK over the last 14 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Renaissance Technologies, managed by Jim Simons, holds the largest position in Comstock Resources Inc (NYSE:CRK). Renaissance Technologies has a $3.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Citadel Investment Group, led by Ken Griffin, holding a $0.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that are bullish contain Michael Gelband’s ExodusPoint Capital, Israel Englander’s Millennium Management and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. ExodusPoint Capital, managed by Michael Gelband, initiated the most valuable position in Comstock Resources Inc (NYSE:CRK). ExodusPoint Capital had $0.2 million invested in the company at the end of the quarter. Michael Platt and William Reeves’s BlueCrest Capital Mgmt. also initiated a $0.1 million position during the quarter. The following funds were also among the new CRK investors: Benjamin A. Smith’s Laurion Capital Management and Andrew Weiss’s Weiss Asset Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Comstock Resources Inc (NYSE:CRK) but similarly valued. We will take a look at Arcus Biosciences, Inc. (NYSE:RCUS), Surgery Partners, Inc. (NASDAQ:SGRY), Blue Bird Corporation (NASDAQ:BLBD), and Crawford & Company (NYSE:CRD). This group of stocks’ market caps are similar to CRK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RCUS | 9 | 70467 | 0 |
| SGRY | 9 | 27358 | 0 |
| BLBD | 7 | 70468 | -11 |
| CRD | 6 | 26707 | -1 |
| Average | 7.75 | 48750 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $4 million in CRK’s case. Arcus Biosciences, Inc. (NYSE:RCUS) is the most popular stock in this table. On the other hand Crawford & Company (NYSE:CRD) is the least popular one with only 6 bullish hedge fund positions. Comstock Resources Inc (NYSE:CRK) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on CRK as the stock returned 49.9% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
