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Hedge Funds Cashing Out Of Callon Petroleum Company (CPE)

Abigail Fisher

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. What do these smart investors think about Callon Petroleum Company (NYSE:CPE)?

Callon Petroleum Company (NYSE:CPE) shareholders have witnessed a decrease in hedge fund interest of late. Our calculations also showed that CPE isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

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. 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 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_736153" align="aligncenter" width="393"] Didric Cederholm of Lion Point Capital[/caption]

Didric Cederholm Lion Point Capital

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 interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to take a peek at the latest hedge fund action surrounding Callon Petroleum Company (NYSE:CPE).

What does smart money think about Callon Petroleum Company (NYSE:CPE)?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -37% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in CPE over the last 18 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Lion Point held the most valuable stake in Callon Petroleum Company (NYSE:CPE), which was worth $4.5 million at the end of the third quarter. On the second spot was Arosa Capital Management which amassed $2.1 million worth of shares. Carlson Capital, Millennium Management, 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 Lion Point allocated the biggest weight to Callon Petroleum Company (NYSE:CPE), around 1.19% of its 13F portfolio. Arosa Capital Management is also relatively very bullish on the stock, earmarking 0.25 percent of its 13F equity portfolio to CPE.

Since Callon Petroleum Company (NYSE:CPE) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there were a few hedgies that slashed their full holdings last quarter. At the top of the heap, Cliff Asness's AQR Capital Management dropped the biggest stake of all the hedgies followed by Insider Monkey, totaling about $56.6 million in stock. Ken Fisher's fund, Fisher Asset Management, also dropped its stock, about $31.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 10 funds last quarter.

Let's check out hedge fund activity in other stocks similar to Callon Petroleum Company (NYSE:CPE). These stocks are Alphatec Holdings Inc (NASDAQ:ATEC), CTO Realty Growth, Inc. (NYSE:CTO), Wins Finance Holdings Inc. (NASDAQ:WINS), and MannKind Corporation (NASDAQ:MNKD). This group of stocks' market valuations match CPE's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ATEC,15,22025,1 CTO,10,22599,-2 WINS,1,196,0 MNKD,5,2540,-4 Average,7.75,11840,-1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $12 million in CPE's case. Alphatec Holdings Inc (NASDAQ:ATEC) is the most popular stock in this table. On the other hand Wins Finance Holdings Inc. (NASDAQ:WINS) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Callon Petroleum Company (NYSE:CPE) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on CPE as the stock returned 158.2% so far in Q2 (through June 22nd) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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