Chesapeake Energy Corporation (NYSE:CHK): Hedge Funds and Insiders Are Bullish, What Should You Do?

Chesapeake Energy Corporation (NYSE:CHK) was in 38 hedge funds’ portfolio at the end of December. CHK has seen an increase in support from the world’s most elite money managers recently. There were 37 hedge funds in our database with CHK holdings at the end of the previous quarter.

Chesapeake Energy (CHK)

In the eyes of most traders, hedge funds are seen as worthless, old investment vehicles of yesteryear. While there are greater than 8000 funds trading at present, we at Insider Monkey look at the aristocrats of this club, close to 450 funds. Most estimates calculate that this group has its hands on the lion’s share of the smart money’s total capital, and by keeping an eye on their highest performing investments, we have uncovered a number of investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).

Just as key, bullish insider trading sentiment is another way to break down the marketplace. There are lots of motivations for an executive to sell shares of his or her company, but just one, very obvious reason why they would buy. Various academic studies have demonstrated the market-beating potential of this strategy if investors understand where to look (learn more here).

Keeping this in mind, let’s take a gander at the latest action surrounding Chesapeake Energy Corporation (NYSE:CHK).

How have hedgies been trading Chesapeake Energy Corporation (NYSE:CHK)?

At year’s end, a total of 38 of the hedge funds we track held long positions in this stock, a change of 3% from the previous quarter. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings considerably.

Of the funds we track, Mason Hawkins’s Southeastern Asset Management had the largest position in Chesapeake Energy Corporation (NYSE:CHK), worth close to $1.421 billion, accounting for 6.2% of its total 13F portfolio. Coming in second is Icahn Capital LP, managed by Carl Icahn, which held a $992 million position; the fund has 7.7% of its 13F portfolio invested in the stock. Remaining hedgies with similar optimism include Mohnish Pabrai’s Mohnish Pabrai, D. E. Shaw’s D E Shaw and Jeffrey Vinik’s Vinik Asset Management.

Consequently, key hedge funds have jumped into Chesapeake Energy Corporation (NYSE:CHK) headfirst. Caxton Associates LP, managed by Bruce Kovner, assembled the biggest call position in Chesapeake Energy Corporation (NYSE:CHK). Caxton Associates LP had 17 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $11 million investment in the stock during the quarter. The other funds with brand new CHK positions are , Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners, and .

Insider trading activity in Chesapeake Energy Corporation (NYSE:CHK)

Bullish insider trading is best served when the company in focus has seen transactions within the past six months. Over the latest six-month time frame, Chesapeake Energy Corporation (NYSE:CHK) has seen 3 unique insiders purchasing, and zero insider sales (see the details of insider trades here).

With the results demonstrated by the aforementioned strategies, retail investors must always monitor hedge fund and insider trading activity, and Chesapeake Energy Corporation (NYSE:CHK) shareholders fit into this picture quite nicely.

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Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.

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