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How Did Concho Resources Inc. (CXO) Compare Against Top Hedge Fund Stocks in 2019?

Nina Todic

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds' top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by more than 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 Concho Resources Inc. (NYSE:CXO).

Concho Resources Inc. (NYSE:CXO) was in 28 hedge funds' portfolios at the end of the third quarter of 2019. CXO shareholders have witnessed an increase in enthusiasm from smart money lately. There were 27 hedge funds in our database with CXO positions at the end of the previous quarter. Our calculations also showed that CXO isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

In today’s marketplace there are a large number of tools stock traders have at their disposal to value publicly traded companies. A duo of the most underrated tools are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the elite money managers can outclass their index-focused peers by a very impressive amount (see the details here).

[caption id="attachment_728376" align="aligncenter" width="473"] Jonathan Barrett of Luminus Management[/caption]

Jonathan Barrett Luminus Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. Now let's take a glance at the fresh hedge fund action surrounding Concho Resources Inc. (NYSE:CXO).

How are hedge funds trading Concho Resources Inc. (NYSE:CXO)?

Heading into the fourth quarter of 2019, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the second quarter of 2019. By comparison, 32 hedge funds held shares or bullish call options in CXO a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Citadel Investment Group was the largest shareholder of Concho Resources Inc. (NYSE:CXO), with a stake worth $143.8 million reported as of the end of September. Trailing Citadel Investment Group was Millennium Management, which amassed a stake valued at $38.5 million. Point72 Asset Management, Alyeska Investment Group, and Luminus Management 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 Game Creek Capital allocated the biggest weight to Concho Resources Inc. (NYSE:CXO), around 2.45% of its 13F portfolio. SailingStone Capital Partners is also relatively very bullish on the stock, setting aside 2.38 percent of its 13F equity portfolio to CXO.

Consequently, specific money managers have jumped into Concho Resources Inc. (NYSE:CXO) headfirst. Luminus Management, managed by Jonathan Barrett and Paul Segal, created the largest position in Concho Resources Inc. (NYSE:CXO). Luminus Management had $29.6 million invested in the company at the end of the quarter. Clint Carlson's Carlson Capital also made a $28.7 million investment in the stock during the quarter. The other funds with new positions in the stock are David Harding's Winton Capital Management, Sean Murphy's Game Creek Capital, and George Soros's Soros Fund Management.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Concho Resources Inc. (NYSE:CXO) but similarly valued. These stocks are Enel Americas S.A. (NYSE:ENIA), Skyworks Solutions Inc (NASDAQ:SWKS), CenturyLink, Inc. (NYSE:CTL), and DexCom, Inc. (NASDAQ:DXCM). This group of stocks' market caps match CXO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ENIA,8,180580,-3 SWKS,24,690929,-7 CTL,28,1097755,1 DXCM,33,558258,3 Average,23.25,631881,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $632 million. That figure was $388 million in CXO's case. DexCom, Inc. (NASDAQ:DXCM) is the most popular stock in this table. On the other hand Enel Americas S.A. (NYSE:ENIA) is the least popular one with only 8 bullish hedge fund positions. Concho Resources Inc. (NYSE:CXO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately CXO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CXO were disappointed as the stock returned -14.3% in 2019 and trailed 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 many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Disclosure: None. This article was originally published at Insider Monkey.

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