You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
HighPoint Resources Corporation (NYSE:HPR) investors should be aware of a decrease in hedge fund interest recently. Our calculations also showed that hpr isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to take a peek at the key hedge fund action encompassing HighPoint Resources Corporation (NYSE:HPR).
How have hedgies been trading HighPoint Resources Corporation (NYSE:HPR)?
At Q3's end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -32% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in HPR over the last 13 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in HighPoint Resources Corporation (NYSE:HPR), which was worth $48.5 million at the end of the third quarter. On the second spot was Huber Capital Management which amassed $24.3 million worth of shares. Moreover, Nokomis Capital, Royce & Associates, and Citadel Investment Group were also bullish on HighPoint Resources Corporation (NYSE:HPR), allocating a large percentage of their portfolios to this stock.
Judging by the fact that HighPoint Resources Corporation (NYSE:HPR) has witnessed declining sentiment from hedge fund managers, we can see that there was a specific group of hedgies that slashed their entire stakes heading into Q3. At the top of the heap, Israel Englander's Millennium Management sold off the biggest investment of all the hedgies tracked by Insider Monkey, worth about $3.1 million in stock. Vince Maddi and Shawn Brennan's fund, SIR Capital Management, also said goodbye to its stock, about $1.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 6 funds heading into Q3.
Let's check out hedge fund activity in other stocks similar to HighPoint Resources Corporation (NYSE:HPR). These stocks are AdvanSix Inc. (NYSE:ASIX), Athenex, Inc. (NASDAQ:ATNX), Health Insurance Innovations Inc (NASDAQ:HIIQ), and Karyopharm Therapeutics Inc (NASDAQ:KPTI). This group of stocks' market valuations resemble HPR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ASIX,23,156106,5 ATNX,7,63307,1 HIIQ,17,259590,-4 KPTI,18,216629,4 Average,16.25,173908,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $105 million in HPR's case. AdvanSix Inc. (NYSE:ASIX) is the most popular stock in this table. On the other hand Athenex, Inc. (NASDAQ:ATNX) is the least popular one with only 7 bullish hedge fund positions. HighPoint Resources Corporation (NYSE:HPR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. In this regard ASIX might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.