Apparently, the hedge fund industry as a whole does not believe that a long-term bear market for U.S equities is forthcoming, as they have been net buyers of stocks during the last four trading weeks. According to Bank of America Merrill Lynch, the smart money industry had not bought equities so heavily since September of 2010. Although it is hard to predict which hedge fund firms will outperform the industry and the broader market in 2016, individual investors should still keep a close eye on hedge fund moves, especially amid increased volatility and lower valuations. Having said that, this article will examine four 13G filings submitted by widely-known money managers Andreas Halvorsen, Stephen Mandel, Peter S. Park, and Jason Karp. Two of these billionaires are among the top-ten most successful hedge fund managers in the history of the hedge fund industry (the list is based on the amount of money earned by their funds since inception).
Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).
According to a Schedule 13G filing, Viking Global, managed by Andreas Halvorsen, acquired a new stake of 11.59 million shares in Range Resources Corp. (NYSE:RRC), which makes up 6.8% of the company’s total shares. Some may raise their eyebrows at this fact, but I can clearly affirm that the billionaire investor is bullish on the oil and natural gas industry. Just recently, the Insider Monkey team discussed Viking Global’s new stakes in Southwestern Energy Company (NYSE:SWN) and Cabot Oil & Gas Corporation (NYSE:COG). The Texas-based independent natural gas, natural gas liquids (NGLs) and oil company operates properties in the Appalachian and Midcontinent regions of the United States. Although Range Resources Corp. (NYSE:RRC) has total debt of $3.59 billion and only $490,000 in cash as of September 30, the company’s available borrowing capacity under its bank credit facility, its net cash generated from operating activities, and its oil derivatives contracts in place are sufficient to meet its near-term financial obligations and liquidity needs. The company had a portion of its production volumes for the remainder of 2015, and for 2016 and 2017 hedged as of the end of September, but the low crude oil and natural gas prices will still result in lower revenue due to the company’s unhedged volumes. Moreover, a sustained low commodity price environment reduces the prices for which RRC can hedge its future production volumes. The shares of RRC have declined by 41% over the last year, but they appear to be in a bottoming out phase at the moment. The hedge fund sentiment towards the stock was weak during the third quarter, considering that the number of top money managers with positions in the company dropped to 31 from 42 quarter-over-quarter. Steven Cohen’s Point72 Asset Management reported owning 796,700 shares of Range Resources Corp. (NYSE:RRC) through its 13F for the third quarter.
Let’s head to the next two pages of this article, where we discuss the other three filings submitted by the aforementioned investors.