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Did Hedge Funds Drop The Ball On Comstock Resources Inc (CRK) ?

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ complex research processes to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space. Nevertheless, it is also possible to find underpriced large-cap stocks by following the hedge funds’ moves.

Comstock Resources Inc (NYSE:CRK) has seen a decrease in support from the world’s most elite money managers of late. Our calculations also showed that CRK isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Today there are a lot of signals shareholders can use to appraise their stock investments. A pair of the most under-the-radar signals are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can beat the market by a healthy margin (see the details here).

Paul Marshall Marshall Wace

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to review the key hedge fund action surrounding Comstock Resources Inc (NYSE:CRK).

What have hedge funds been doing with Comstock Resources Inc (NYSE:CRK)?

At Q2’s end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -50% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CRK over the last 16 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with CRK Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the largest position in Comstock Resources Inc (NYSE:CRK), worth close to $1.9 million, corresponding to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Israel Englander of Millennium Management, with a $0.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions comprise Paul Marshall and Ian Wace’s Marshall Wace LLP, Ken Griffin’s Citadel Investment Group and Ken Griffin’s Citadel Investment Group.

Judging by the fact that Comstock Resources Inc (NYSE:CRK) has experienced bearish sentiment from hedge fund managers, it’s safe to say that there were a few fund managers who sold off their positions entirely last quarter. Intriguingly, Michael Gelband’s ExodusPoint Capital sold off the largest position of the 750 funds tracked by Insider Monkey, totaling close to $1 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund dropped about $0.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Comstock Resources Inc (NYSE:CRK) but similarly valued. We will take a look at Himax Technologies, Inc. (NASDAQ:HIMX), Koppers Holdings Inc. (NYSE:KOP), Heritage-Crystal Clean, Inc. (NASDAQ:HCCI), and Pzena Investment Management Inc (NYSE:PZN). This group of stocks’ market caps are similar to CRK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HIMX 8 18514 -1
KOP 12 40629 -1
HCCI 9 68760 -3
PZN 6 18972 -1
Average 8.75 36719 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $4 million in CRK’s case. Koppers Holdings Inc. (NYSE:KOP) is the most popular stock in this table. On the other hand Pzena Investment Management Inc (NYSE:PZN) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Comstock Resources Inc (NYSE:CRK) is even less popular than PZN. Hedge funds clearly dropped the ball on CRK as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on CRK as the stock returned 39.9% during the third quarter and outperformed the market by an even larger margin.

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

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