Why Are These Stocks Trading Higher Today?

It’s the first Monday of 2016 and the markets are down with all three indices in the red, but shares of Barrick Gold Corporation (USA) (NYSE:ABX), Kinder Morgan Inc (NYSE:KMI), Chesapeake Energy Corporation (NYSE:CHK), Seadrill Ltd (NYSE:SDRL) and Whiting Petroleum Corp (NYSE:WLL) are trading above the market. So let’s take a look a closer look at these stocks and see the hedge fund sentiment towards them.

Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by 52 percentage points since the end of August 2012. These stocks returned a cumulative of 102% vs. a 48.6% gain for the S&P 500 Index (see the details here). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).

The first on the list is Barrick Gold Corporation (USA) (NYSE:ABX), whose stock is well in the green by 6%, after dropping in the last trading day of 2015 on the back of a fall in gold prices. But today, gold, as well as oil prices, are surging amid geopolitical tensions in the Middle East, specifically between Saudi Arabia and Iran, which have broken the diplomatic relationship, and this increases the possibility of a supply interruption. Between July and September, Barrick Gold Corporation (USA) (NYSE:ABX) registered a decrease in popularity among the funds we track, with 40 investors holding long positions versus 42 funds in the previous quarter. First Eagle Investment Management was the largest shareholder with 27.85 million shares, valued at $177.11 million at the end of September.

Second in our list is Kinder Morgan Inc (NYSE:KMI), whose shares are up more than 1% today and it is continuing the upward trend since the past Thursday when shares were up as oil prices rose. Kinder Morgan Inc (NYSE:KMI) registered an increase in popularity among the funds we track, with 72 investors holding long positions at the end of September, amassing around 3.0% of its outstanding stock. Bain Capital‘s Brookside Capital is the largest shareholder of the company among the investors we follow, with 16.31 million shares valued at $15.0 million as of the end of the third quarter.

On the next page, we are going to take a closer look at three energy stocks and the reasons behind their appreciation today.

In other news, shares of energy stocks, including Chesapeake Energy Corporation (NYSE:CHK), Seadrill Ltd (NYSE:SDRL), and Whiting Petroleum Corp (NYSE:WLL) are trading higher following hedge fund manager Kyle Bass‘ interview on “Wall Street Week“, in which he suggested that the energy sector may be headed towards a rebound. He based his analysis on higher demand and a positive global GDP outlook. Earlier today, analysts at Raymond James downgraded the firm to ‘Underperform’ from ‘Market Perform’ and lowered their price target to $4.5 from $6.9. Raymond James’ downgrade comes on the back of “weak natural gas price forecast and balance sheet concerns” and after Chesapeake shares slid by more than 75% during the past year.

Among the funds we follow, 34 reported long positions in Chesapeake Energy Corporation as of the end of September, up by one fund over the quarter. Carl Icahn‘s Icahn Capital Lp is the largest shareholder of the company among the investors we follow, with 73.05 million shares disclosed in its latest 13F filing.

Seadrill Ltd (NYSE:SDRL)’s shares are up by around 3.5%. Seadrill Ltd (NYSE:SDRL) registered an increase in popularity among the funds we track, with 23 investors holding long positions at the end of September, versus 18 funds a quarter earlier. Anand Parekh‘s Alyeska Investment Group is the largest shareholder with 3.55 million shares, valued at $20.93 million at the end of September.

Finally, shares of Whiting Petroleum Corp (NYSE:WLL) started in the green and following a slump are trading slightly higher than the previous close. Whiting Petroleum Corp (NYSE:WLL) lost popularity in the third quarter and out of the 730 funds that we track, 42 funds reported holding shares of the company as of the end of September, amassing 24.6% of the float. John Paulson’s Paulson & Co has the most valuable position in Whiting Petroleum Corp, worth $146.6 million, amounting to 0.76% of its total 13F portfolio value.

Disclosure: none