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Cimarex Energy Co (XEC): Hedge Funds Are Snapping Up

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Cimarex Energy Co (NYSE:XEC).

Cimarex Energy Co (NYSE:XEC) shareholders have witnessed an increase in hedge fund interest of late. XEC was in 35 hedge funds’ portfolios at the end of the first quarter of 2020. There were 33 hedge funds in our database with XEC holdings at the end of the previous quarter. Our calculations also showed that XEC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most traders, hedge funds are assumed to be slow, outdated financial vehicles of the past. While there are over 8000 funds in operation at the moment, We hone in on the moguls of this club, approximately 850 funds. These money managers command the lion’s share of all hedge funds’ total capital, and by shadowing their first-class stock picks, Insider Monkey has discovered a number of investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s analyze the latest hedge fund action surrounding Cimarex Energy Co (NYSE:XEC).

How have hedgies been trading Cimarex Energy Co (NYSE:XEC)?

At Q1’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards XEC over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is XEC A Good Stock To Buy?

Among these funds, Citadel Investment Group held the most valuable stake in Cimarex Energy Co (NYSE:XEC), which was worth $67.6 million at the end of the third quarter. On the second spot was Diamond Hill Capital which amassed $62.3 million worth of shares. Encompass Capital Advisors, International Value Advisers, and Balyasny Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Encompass Capital Advisors allocated the biggest weight to Cimarex Energy Co (NYSE:XEC), around 5.2% of its 13F portfolio. Deep Basin Capital is also relatively very bullish on the stock, dishing out 5.14 percent of its 13F equity portfolio to XEC.

As one would reasonably expect, some big names have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the biggest position in Cimarex Energy Co (NYSE:XEC). Arrowstreet Capital had $10.9 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $7.4 million position during the quarter. The other funds with brand new XEC positions are Clint Carlson’s Carlson Capital, Till Bechtolsheimer’s Arosa Capital Management, and Bruce Kovner’s Caxton Associates LP.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Cimarex Energy Co (NYSE:XEC) but similarly valued. These stocks are American Equity Investment Life Holding (NYSE:AEL), Innospec Inc. (NASDAQ:IOSP), Papa John’s International, Inc. (NASDAQ:PZZA), and Merit Medical Systems, Inc. (NASDAQ:MMSI). This group of stocks’ market valuations resemble XEC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AEL 12 43458 -5
IOSP 14 70798 -4
PZZA 29 251238 1
MMSI 11 195740 -6
Average 16.5 140309 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $140 million. That figure was $399 million in XEC’s case. Papa John’s International, Inc. (NASDAQ:PZZA) is the most popular stock in this table. On the other hand Merit Medical Systems, Inc. (NASDAQ:MMSI) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Cimarex Energy Co (NYSE:XEC) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on XEC as the stock returned 57.6% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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Disclosure: None. This article was originally published at Insider Monkey.