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While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding California Resources Corporation (NYSE:CRC).
California Resources Corporation (NYSE:CRC) shareholders have witnessed a decrease in hedge fund sentiment of late. California Resources Corporation (NYSE:CRC) was in 20 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 23. There were 23 hedge funds in our database with CRC holdings at the end of March. Our calculations also showed that CRC isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Jim Simons of Renaissance Technologies
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, plant based food market is expected to explode 100-fold by 2050, so we are checking out this under-the-radar stock. We go through lists like the 10 best growth stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let's check out the key hedge fund action regarding California Resources Corporation (NYSE:CRC).
Do Hedge Funds Think CRC Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CRC over the last 24 quarters. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in California Resources Corporation (NYSE:CRC) was held by GoldenTree Asset Management, which reported holding $410 million worth of stock at the end of June. It was followed by Encompass Capital Advisors with a $72.7 million position. Other investors bullish on the company included Orbis Investment Management, Slate Path Capital, and GRT Capital Partners. In terms of the portfolio weights assigned to each position GoldenTree Asset Management allocated the biggest weight to California Resources Corporation (NYSE:CRC), around 10.88% of its 13F portfolio. Encompass Capital Advisors is also relatively very bullish on the stock, earmarking 5.07 percent of its 13F equity portfolio to CRC.
Judging by the fact that California Resources Corporation (NYSE:CRC) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of money managers that decided to sell off their positions entirely last quarter. Interestingly, Michael Gelband's ExodusPoint Capital said goodbye to the largest position of the 750 funds tracked by Insider Monkey, totaling an estimated $3 million in stock. John Overdeck and David Siegel's fund, Two Sigma Advisors, also said goodbye to its stock, about $1.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds last quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as California Resources Corporation (NYSE:CRC) but similarly valued. These stocks are TreeHouse Foods Inc. (NYSE:THS), Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), Fluor Corporation (NYSE:FLR), Verra Mobility Corporation (NASDAQ:VRRM), Independent Bank Corp (NASDAQ:INDB), Sally Beauty Holdings, Inc. (NYSE:SBH), and Niu Technologies (NASDAQ:NIU). All of these stocks' market caps are similar to CRC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position THS,22,278636,-5 SBGI,20,484932,1 FLR,22,124101,5 VRRM,22,395107,4 INDB,13,47935,2 SBH,22,143723,3 NIU,13,186938,-1 Average,19.1,237339,1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.1 hedge funds with bullish positions and the average amount invested in these stocks was $237 million. That figure was $589 million in CRC's case. TreeHouse Foods Inc. (NYSE:THS) is the most popular stock in this table. On the other hand Independent Bank Corp (NASDAQ:INDB) is the least popular one with only 13 bullish hedge fund positions. California Resources Corporation (NYSE:CRC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CRC is 67. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on CRC as the stock returned 44.6% since the end of Q2 (through 10/22) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.