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Hedge Funds Never Been Less Bullish On Continental Resources, Inc. (CLR)

Abigail Fisher

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Continental Resources, Inc. (NYSE:CLR) based on that data.

Is Continental Resources, Inc. (NYSE:CLR) undervalued? The best stock pickers are taking a pessimistic view. The number of bullish hedge fund positions shrunk by 12 recently. Our calculations also showed that CLR 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 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 S&P 500 ETFs by 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 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.

[caption id="attachment_30600" align="aligncenter" width="393"] Bruce Kovner of Caxton Associates LP[/caption]

Bruce Kovner, Caxton Associates LP

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. 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 let's check out the fresh hedge fund action encompassing Continental Resources, Inc. (NYSE:CLR).

How are hedge funds trading Continental Resources, Inc. (NYSE:CLR)?

At Q1's end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -32% from the fourth quarter of 2019. On the other hand, there were a total of 31 hedge funds with a bullish position in CLR a year ago. With the smart money's capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, D. E. Shaw's D E Shaw has the number one position in Continental Resources, Inc. (NYSE:CLR), worth close to $25.3 million, accounting for less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Two Sigma Advisors, managed by John Overdeck and David Siegel, which holds a $18.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining peers with similar optimism consist of Paul Marshall and Ian Wace's Marshall Wace LLP, Israel Englander's Millennium Management and David Harding's Winton Capital Management. In terms of the portfolio weights assigned to each position Centenus Global Management allocated the biggest weight to Continental Resources, Inc. (NYSE:CLR), around 0.63% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, earmarking 0.33 percent of its 13F equity portfolio to CLR.

Seeing as Continental Resources, Inc. (NYSE:CLR) has witnessed a decline in interest from the aggregate hedge fund industry, we can see that there exists a select few hedgies who sold off their entire stakes heading into Q4. It's worth mentioning that Todd J. Kantor's Encompass Capital Advisors dropped the largest investment of all the hedgies followed by Insider Monkey, valued at close to $69.8 million in stock. Steve Cohen's fund, Point72 Asset Management, also sold off its stock, about $48.9 million worth. These moves are important to note, as total hedge fund interest fell by 12 funds heading into Q4.

Let's go over hedge fund activity in other stocks similar to Continental Resources, Inc. (NYSE:CLR). We will take a look at Stantec Inc. (NYSE:STN), Brixmor Property Group Inc (NYSE:BRX), Affiliated Managers Group, Inc. (NYSE:AMG), and Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR). This group of stocks' market caps resemble CLR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STN,12,52596,3 BRX,28,79124,12 AMG,27,309620,-11 ASR,4,31709,-6 Average,17.75,118262,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $118 million. That figure was $67 million in CLR's case. Brixmor Property Group Inc (NYSE:BRX) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR) is the least popular one with only 4 bullish hedge fund positions. Continental Resources, Inc. (NYSE:CLR) is not the most popular stock in this group but hedge fund interest is still above average. 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 gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on CLR as the stock returned 60.1% in Q2 (through the end of May) 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.

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