We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Crescent Point Energy Corp (NYSE:CPG).
Is Crescent Point Energy Corp (NYSE:CPG) a buy right now? Prominent investors are reducing their bets on the stock. The number of long hedge fund bets decreased by 2 in recent months. Our calculations also showed that CPG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). CPG was in 10 hedge funds’ portfolios at the end of September. There were 12 hedge funds in our database with CPG positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Noam Gottesman of GLG Partners
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We’re going to take a gander at the latest hedge fund action surrounding Crescent Point Energy Corp (NYSE:CPG).
What have hedge funds been doing with Crescent Point Energy Corp (NYSE:CPG)?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the second quarter of 2019. By comparison, 12 hedge funds held shares or bullish call options in CPG 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, GLG Partners was the largest shareholder of Crescent Point Energy Corp (NYSE:CPG), with a stake worth $19.3 million reported as of the end of September. Trailing GLG Partners was Renaissance Technologies, which amassed a stake valued at $15.7 million. Citadel Investment Group, Two Sigma Advisors, and Waratah Capital Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Waratah Capital Advisors allocated the biggest weight to Crescent Point Energy Corp (NYSE:CPG), around 0.31% of its 13F portfolio. GLG Partners is also relatively very bullish on the stock, designating 0.07 percent of its 13F equity portfolio to CPG.
Since Crescent Point Energy Corp (NYSE:CPG) has faced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there were a few hedgies that decided to sell off their positions entirely last quarter. Interestingly, Jonathan Barrett and Paul Segal’s Luminus Management sold off the largest position of the “upper crust” of funds followed by Insider Monkey, valued at about $7.3 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund sold off about $5.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 2 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Crescent Point Energy Corp (NYSE:CPG). We will take a look at Anixter International Inc. (NYSE:AXE), Domtar Corporation (NYSE:UFS), EVO Payments, Inc. (NASDAQ:EVOP), and Visteon Corp (NYSE:VC). All of these stocks’ market caps are similar to CPG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AXE | 18 | 293397 | -2 |
| UFS | 21 | 113431 | 3 |
| EVOP | 15 | 45312 | 2 |
| VC | 20 | 416758 | 3 |
| Average | 18.5 | 217225 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $217 million. That figure was $64 million in CPG’s case. Domtar Corporation (NYSE:UFS) is the most popular stock in this table. On the other hand EVO Payments, Inc. (NASDAQ:EVOP) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Crescent Point Energy Corp (NYSE:CPG) is even less popular than EVOP. Hedge funds dodged a bullet by taking a bearish stance towards CPG. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CPG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CPG investors were disappointed as the stock returned -17.8% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
