Why Facebook, Citigroup, Continental Resources, and 2 Other Stocks Are Making Noise Today

It’s the beginning of another week and crude futures are more than 2% in the red, dragging down the major U.S. indexes, which have all opened Monday’s session in the red as well.

Among the stocks trending this morning are Facebook Inc (NASDAQ:FB), Citigroup Inc (NYSE:C), SM Energy Co (NYSE:SM), Continental Resources, Inc. (NYSE:CLR), and Anadarko Petroleum Corporation (NYSE:APC). We’ll take a closer look at the news driving the interest in each of those five stocks this morning and examine how some of the world’s greatest investors traded them during the second quarter.

While there are many metrics that investors can assess in the investment process, the hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor to beat the S&P 500 by around 95 basis points per month (see the details here).

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Barron’s Sees 20% Upside For Facebook 

In the opinion of Barron’s writer Jack Hough, Facebook Inc (NASDAQ:FB) will continue to outperform the market going forward. Although the financial magazine was initially bearish on Facebook when it traded for $23 per share in 2012, Barron’s is now bullish on the social media giant given the fast pace of Facebook’s growth. Facebook sales increased by 56% year-over-year in the first half of 2016 and its earnings more than doubled based on GAAP metrics. If Wall Street’s predictions of adjusted EPS of $9.64 per share by 2020 are correct, Facebook’s growth will likely continue and its stock could rise by 20% or more over the next 12 months. The smart money agrees with Barron’s. Facebook Inc (NASDAQ:FB) jumped to the top of the charts among the hedge funds in our database during the second quarter, being held by 148 of them on June 30, overtaking the previous most popular stock Allergan PLC (NYSE:AGN).

Citigroup is a Value Play

Citigroup Inc (NYSE:C) has substantial upside according to this weekend’s Barron’s article, ‘Citigroup is Cheap.’ Given the fact that Citigroup has materially under-performed the S&P, Barron’s writer Vito Ranelli believes Citigroup “could provide a robust double-digit percentage annual return with relatively low volatility” and  offer additional upside if interest rates rise faster than estimates. Mr. Ranelli notes that many analysts believe Citigroup’s profitability warrants a valuation of at least tangible book value, or $53 per share, and that Citigroup Inc (NYSE:C) could easily be worth $60 or more in two years when factoring in the value of Citigroup’s tax credit assets. Citigroup shares are currently trading at $46.39 in early morning trading. Seth Klarman‘s Baupost Group reported owning a stake of over 102 million shares of the investment bank as of the end of the second quarter.

On the next page we’ll take a closer look at why SM Energy, Continental Resources, and Anadarko Petroleum Corporation are in the crosshairs of investors today.

Oil E&Ps SM Energy Co (NYSE:SM), Continental Resources, Inc. (NYSE:CLR), and Anadarko Petroleum Corporation (NYSE:APC) are in the spotlight today after Barron’s columnist Ben Levisohn wrote that oil stocks could continue to rally. With WTI prices close to $50 per barrel, many investors have been snapping up the high-quality names in the sector. One of the best performers this year has been SM Energy Co (NYSE:SM), which has rallied by over 80% year-to-date. Investors like the stock due to the combination of higher crude prices and due to SM’s purchase of acreage in the Permian Basin this month.

Mr. Levisohn thinks Continental Resources, Inc. (NYSE:CLR), which is close to a 52-week high, and Anadarko Petroleum Corporation (NYSE:APC) are also candidates to rally given their deleveraging efforts.

Given that all three companies have relatively competitive production costs, it’s not surprising that many hedge funds in our system are long each stock. As of June 30, Clint Carlson’s Carlson Capital was long 1.7 million shares of Continental Resources, while Jim Simons’ Renaissance Technologies owned more than 227,000 shares of SM Energy. Anadarko witnessed a declination in hedge fund interest during the second quarter however, being held in the portfolios of 48 hedge funds on June 30, down from 59 a quarter earlier.

Disclosure: None