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 Cimarex Energy Co (NYSE:XEC).
Is Cimarex Energy Co (NYSE:XEC) a good investment today? Investors who are in the know are betting on the stock. The number of long hedge fund bets increased by 4 lately. Our calculations also showed that XEC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). XEC was in 31 hedge funds' portfolios at the end of September. There were 27 hedge funds in our database with XEC holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most traders, hedge funds are perceived as underperforming, old financial tools of the past. While there are over 8000 funds trading at present, Our researchers choose to focus on the crème de la crème of this club, approximately 750 funds. Most estimates calculate that this group of people command the lion's share of the smart money's total asset base, and by shadowing their matchless equity investments, Insider Monkey has deciphered several investment strategies that have historically surpassed the broader indices. 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 May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_735675" align="aligncenter" width="473"] Didric Cederholm of Lion Point Capital[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to review the recent hedge fund action surrounding Cimarex Energy Co (NYSE:XEC).
How have hedgies been trading Cimarex Energy Co (NYSE:XEC)?
Heading into the fourth quarter of 2019, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the second quarter of 2019. On the other hand, there were a total of 23 hedge funds with a bullish position in XEC a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Cimarex Energy Co (NYSE:XEC) was held by Diamond Hill Capital, which reported holding $299.4 million worth of stock at the end of September. It was followed by International Value Advisers with a $129.5 million position. Other investors bullish on the company included Adage Capital Management, Encompass Capital Advisors, and Deep Basin Capital. In terms of the portfolio weights assigned to each position Encompass Capital Advisors allocated the biggest weight to Cimarex Energy Co (NYSE:XEC), around 7.45% of its portfolio. Deep Basin Capital is also relatively very bullish on the stock, dishing out 5.32 percent of its 13F equity portfolio to XEC.
Now, key hedge funds have jumped into Cimarex Energy Co (NYSE:XEC) headfirst. Citadel Investment Group, managed by Ken Griffin, created the largest position in Cimarex Energy Co (NYSE:XEC). Citadel Investment Group had $35.4 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also made a $12 million investment in the stock during the quarter. The other funds with new positions in the stock are Vince Maddi and Shawn Brennan's SIR Capital Management, Clint Carlson's Carlson Capital, and Didric Cederholm's Lion Point.
Let's now take a look at hedge fund activity in other stocks similar to Cimarex Energy Co (NYSE:XEC). We will take a look at Ultrapar Participacoes SA (NYSE:UGP), Prosperity Bancshares, Inc. (NYSE:PB), Performance Food Group Company (NYSE:PFGC), and Rexford Industrial Realty Inc (NYSE:REXR). All of these stocks' market caps are closest to XEC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UGP,5,45121,-2 PB,17,89818,1 PFGC,23,158474,4 REXR,17,68044,0 Average,15.5,90364,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $926 million in XEC's case. Performance Food Group Company (NYSE:PFGC) is the most popular stock in this table. On the other hand Ultrapar Participacoes SA (NYSE:UGP) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Cimarex Energy Co (NYSE:XEC) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately XEC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on XEC were disappointed as the stock returned -3.7% during the first two months of the fourth quarter 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 in Q4.
Disclosure: None. This article was originally published at Insider Monkey.