Cobalt International Energy, Inc. (NYSE:CIE) investors should be aware of an increase in hedge fund sentiment of late.
To most traders, hedge funds are assumed to be worthless, old investment vehicles of yesteryear. While there are more than 8000 funds with their doors open at present, we look at the leaders of this club, around 450 funds. It is estimated that this group controls the lion's share of the hedge fund industry's total asset base, and by keeping an eye on their best equity investments, we have unearthed a few investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we've began to sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).
Just as key, bullish insider trading sentiment is a second way to break down the world of equities. As the old adage goes: there are a variety of motivations for an insider to drop shares of his or her company, but just one, very obvious reason why they would buy. Many empirical studies have demonstrated the valuable potential of this tactic if piggybackers understand what to do (learn more here).
With all of this in mind, let's take a glance at the latest action regarding Cobalt International Energy, Inc. (NYSE:CIE).
At the end of the first quarter, a total of 27 of the hedge funds we track were long in this stock, a change of 13% from the previous quarter. With the smart money's positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes meaningfully.
According to our comprehensive database, Citadel Investment Group, managed by Ken Griffin, holds the most valuable position in Cobalt International Energy, Inc. (NYSE:CIE). Citadel Investment Group has a $93.1 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Paulson & Co, managed by John Paulson, which held a $55.8 million position; 0.3% of its 13F portfolio is allocated to the company. Remaining hedgies with similar optimism include John Murphy's Alydar Capital, Israel Englander's Millennium Management and Rob Citrone's Discovery Capital Management.
Now, specific money managers were leading the bulls' herd. Paulson & Co, managed by John Paulson, assembled the biggest position in Cobalt International Energy, Inc. (NYSE:CIE). Paulson & Co had 55.8 million invested in the company at the end of the quarter. Leon Cooperman's Omega Advisors also made a $28.2 million investment in the stock during the quarter. The other funds with new positions in the stock are John Paulson's Paulson & Co, Wayne Cooperman's Cobalt Capital Management, and Louis Bacon's Moore Global Investments.
Insider buying is at its handiest when the company in question has seen transactions within the past six months. Over the latest half-year time period, Cobalt International Energy, Inc. (NYSE:CIE) has experienced 1 unique insiders purchasing, and 17 insider sales (see the details of insider trades here).
Let's also examine hedge fund and insider activity in other stocks similar to Cobalt International Energy, Inc. (NYSE:CIE). These stocks are Cabot Oil & Gas Corporation (NYSE:COG), Chesapeake Energy Corporation (NYSE:CHK), Range Resources Corp. (NYSE:RRC), Southwestern Energy Company (NYSE:SWN), and Talisman Energy Inc. (USA) (NYSE:TLM). This group of stocks belong to the independent oil & gas industry and their market caps are closest to CIE's market cap.