Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. At Insider Monkey, we pore over the filings of nearly 835 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not PDC Energy Inc (NASDAQ:PDCE) makes for a good investment right now.
PDC Energy Inc (NASDAQ:PDCE) investors should be aware of an increase in activity from the world’s largest hedge funds recently. Our calculations also showed that PDCE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the eyes of most market participants, hedge funds are seen as slow, outdated financial vehicles of years past. While there are over 8000 funds with their doors open at present, Our researchers hone in on the leaders of this club, approximately 850 funds. These investment experts watch over the majority of the hedge fund industry’s total capital, and by observing their inimitable picks, Insider Monkey has uncovered a few investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Didric Cederholm of Lion Point Capital
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s go over the fresh hedge fund action surrounding PDC Energy Inc (NASDAQ:PDCE).
How have hedgies been trading PDC Energy Inc (NASDAQ:PDCE)?
At Q4’s end, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 23% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in PDCE a year ago. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Among these funds, Citadel Investment Group held the most valuable stake in PDC Energy Inc (NASDAQ:PDCE), which was worth $62 million at the end of the third quarter. On the second spot was Mangrove Partners which amassed $49.1 million worth of shares. Arrowstreet Capital, Lion Point, and Mangrove Partners 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 Mangrove Partners allocated the biggest weight to PDC Energy Inc (NASDAQ:PDCE), around 7.19% of its 13F portfolio. Lion Point is also relatively very bullish on the stock, earmarking 2.82 percent of its 13F equity portfolio to PDCE.
Consequently, some big names have been driving this bullishness. Mangrove Partners, managed by Nathaniel August, initiated the most outsized position in PDC Energy Inc (NASDAQ:PDCE). Mangrove Partners had $49.1 million invested in the company at the end of the quarter. Vince Maddi and Shawn Brennan’s SIR Capital Management also initiated a $10.3 million position during the quarter. The other funds with brand new PDCE positions are Robert Emil Zoellner’s Alpine Associates, Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, and Clint Carlson’s Carlson Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as PDC Energy Inc (NASDAQ:PDCE) but similarly valued. We will take a look at HNI Corp (NYSE:HNI), CorVel Corporation (NASDAQ:CRVL), G-III Apparel Group, Ltd. (NASDAQ:GIII), and GreenSky, Inc. (NASDAQ:GSKY). All of these stocks’ market caps resemble PDCE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HNI | 20 | 73286 | 3 |
| CRVL | 14 | 154650 | 0 |
| GIII | 19 | 119971 | 6 |
| GSKY | 12 | 36683 | -4 |
| Average | 16.25 | 96148 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $262 million in PDCE’s case. HNI Corp (NYSE:HNI) is the most popular stock in this table. On the other hand GreenSky, Inc. (NASDAQ:GSKY) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks PDC Energy Inc (NASDAQ:PDCE) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th and still beat the market by 4.2 percentage points. Unfortunately PDCE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PDCE were disappointed as the stock returned -68.9% during the three months of 2020 (through April 6th) 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 most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
