Chesapeake Energy Corporation (CHK): Are Hedge Funds Right About This Stock?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Chesapeake Energy Corporation (NYSE:CHK).

Chesapeake Energy Corporation (NYSE:CHK) was in 41 hedge funds’ portfolios at the end of September. CHK investors should pay attention to an increase in support from the world’s most elite money managers lately. There were 31 hedge funds in our database with CHK positions 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 Oceaneering International (NYSE:OII), ENSCO PLC (NYSE:ESV), and National Beverage Corp. (NASDAQ:FIZZ) to gather more data points.

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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.

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Keeping this in mind, we’re going to check out the latest action encompassing Chesapeake Energy Corporation (NYSE:CHK).

What have hedge funds been doing with Chesapeake Energy Corporation (NYSE:CHK)?

At the end of the third quarter, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 32% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

CHK
According to Insider Monkey’s hedge fund database, Southeastern Asset Management, managed by Mason Hawkins, holds the biggest position in Chesapeake Energy Corporation (NYSE:CHK). Southeastern Asset Management has a $578.2 million position in the stock, comprising 5.5% of its 13F portfolio. On Southeastern Asset Management’s heels is Senator Investment Group, led by Doug Silverman and Alexander Klabin, holding a $125.4 million position; 1.7% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish include Robert Pitts’ Steadfast Capital Management, and John Griffin’s Blue Ridge Capital.

As one would reasonably expect, some big names were leading the bulls’ herd. Point State Capital, managed by Zach Schreiber, established the largest position in Chesapeake Energy Corporation (NYSE:CHK). Point State Capital had $121.7 million invested in the company at the end of the quarter. Bruce Kovner’s Caxton Associates LP also initiated a $41.9 million position during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Daniel S. Och’s OZ Management, and Benjamin A. Smith’s Laurion Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Chesapeake Energy Corporation (NYSE:CHK) but similarly valued. We will take a look at Oceaneering International (NYSE:OII), ENSCO PLC (NYSE:ESV), National Beverage Corp. (NASDAQ:FIZZ), and Prestige Brands Holdings, Inc. (NYSE:PBH). All of these stocks’ market caps match CHK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OII 22 165804 -10
ESV 33 555953 3
FIZZ 20 146113 11
PBH 17 204942 -1

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $268 million. That figure was $1.32 billion in CHK’s case. ENSCO PLC (NYSE:ESV) is the most popular stock in this table. On the other hand Prestige Brands Holdings, Inc. (NYSE:PBH) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Chesapeake Energy Corporation (NYSE:CHK) 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.