California Resources Corp (CRC): Falling Out of Favor With Smart Money

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge funds have been producing disappointing net returns in recent years, however that was partly due to the poor performance of small-cap stocks in general. Well, small-cap stocks finally turned the corner and have been beating the large-cap stocks by more than 10 percentage points over the last 5 months.This means the relevancy of hedge funds’ public filings became inarguable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards California Resources Corp (NYSE:CRC).

California Resources Corp (NYSE:CRC) investors should pay attention to a decrease in hedge fund interest in recent months. CRC was in 28 hedge funds’ portfolios at the end of September. There were 35 hedge funds in our database with CRC holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Ennis, Inc. (NYSE:EBF), Momo Inc (ADR) (NASDAQ:MOMO), and Movado Group, Inc (NYSE:MOV) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

What does the smart money think about California Resources Corp (NYSE:CRC)?

At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a 20% drop from one quarter earlier. That drops CRC to its lowest level of hedge fund ownership in the last five quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Soroban Capital Partners, managed by Eric W. Mandelblatt, holds the largest position in California Resources Corp (NYSE:CRC). Soroban Capital Partners has a $25.6 million position in the stock. Sitting at the No. 2 spot is Encompass Capital Advisors, managed by Todd J. Kantor, which holds a $25 million position; the fund has 5.2% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism comprise Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners, George Soros’ Soros Fund Management and Gordy Holterman and Derek Dunn’s Overland Advisors.

Due to the fact that California Resources Corp (NYSE:CRC) has faced a decline in interest from hedge fund managers, it’s safe to say that there were a few funds that slashed their full holdings heading into Q4. Intriguingly, Pasco Alfaro and Richard Tumure’s Miura Global Management cut the biggest position of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $14 million in stock, and David Costen Haley’s HBK Investments was right behind this move, as the fund sold off about a $3.7 million position. These transactions are interesting, as total hedge fund interest dropped by 7 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as California Resources Corp (NYSE:CRC) but similarly valued. We will take a look at Ennis, Inc. (NYSE:EBF), Momo Inc (ADR) (NASDAQ:MOMO), Movado Group, Inc (NYSE:MOV), and SunCoke Energy Partners LP (NYSE:SXCP). All of these stocks’ market caps match CRC’s market cap.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $176 million in CRC’s case. Momo Inc (ADR) (NASDAQ:MOMO) is the most popular stock in this table. On the other hand SunCoke Energy Partners LP (NYSE:SXCP) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks California Resources Corp (NYSE:CRC) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio, bearing in mind that several hedgies dumped the stock in Q3.

Disclosure: None