Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won't accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Chesapeake Utilities Corporation (NYSE:CPK) investors should pay attention to an increase in enthusiasm from smart money lately. Our calculations also showed that CPK isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to check out the fresh hedge fund action regarding Chesapeake Utilities Corporation (NYSE:CPK).
What have hedge funds been doing with Chesapeake Utilities Corporation (NYSE:CPK)?
At the end of the fourth quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in CPK a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Jim Simons's Renaissance Technologies has the most valuable position in Chesapeake Utilities Corporation (NYSE:CPK), worth close to $24.1 million, amounting to less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Millennium Management, led by Israel Englander, holding a $5.4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other professional money managers that hold long positions consist of Peter Algert and Kevin Coldiron's Algert Coldiron Investors, Andrew Feldstein and Stephen Siderow's Blue Mountain Capital and Ken Griffin's Citadel Investment Group.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Holocene Advisors, managed by Brandon Haley, initiated the most outsized position in Chesapeake Utilities Corporation (NYSE:CPK). Holocene Advisors had $0.2 million invested in the company at the end of the quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Chesapeake Utilities Corporation (NYSE:CPK) but similarly valued. These stocks are Revlon Inc (NYSE:REV), Ebix Inc (NASDAQ:EBIX), Seacoast Banking Corporation of Florida (NASDAQ:SBCF), and OSI Systems, Inc. (NASDAQ:OSIS). All of these stocks' market caps are similar to CPK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position REV,26,180187,0 EBIX,18,133327,2 SBCF,6,44504,-3 OSIS,5,7212,-4 Average,13.75,91308,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $91 million. That figure was $35 million in CPK's case. Revlon Inc (NYSE:REV) is the most popular stock in this table. On the other hand OSI Systems, Inc. (NASDAQ:OSIS) is the least popular one with only 5 bullish hedge fund positions. Chesapeake Utilities Corporation (NYSE:CPK) 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. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately CPK wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); CPK investors were disappointed as the stock returned 11.6% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.