Do Hedge Funds and Insiders Love Concho Resources Inc. (NYSE:CXO)?

Concho Resources Inc. (NYSE:CXO) investors should pay attention to an increase in hedge fund sentiment in recent months.


If you’d ask most investors, hedge funds are seen as slow, outdated financial vehicles of yesteryear. While there are more than 8000 funds trading at the moment, we at Insider Monkey hone in on the top tier of this group, about 450 funds. It is estimated that this group oversees the majority of all hedge funds’ total capital, and by keeping an eye on their best picks, we have uncovered a few investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points annually 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 (see all of our picks from August).

Equally as integral, optimistic insider trading activity is another way to break down the financial markets. There are plenty of reasons for a corporate insider to downsize shares of his or her company, but just one, very simple reason why they would initiate a purchase. Plenty of academic studies have demonstrated the impressive potential of this strategy if investors understand what to do (learn more here).

Consequently, it’s important to take a glance at the recent action surrounding Concho Resources Inc. (NYSE:CXO).

Hedge fund activity in Concho Resources Inc. (NYSE:CXO)

At year’s end, a total of 25 of the hedge funds we track were long in this stock, a change of 4% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully.

Of the funds we track, Steven Cohen’s SAC Capital Advisors had the most valuable position in Concho Resources Inc. (NYSE:CXO), worth close to $131 million, accounting for 0.6% of its total 13F portfolio. On SAC Capital Advisors’s heels is Discovery Capital Management, managed by Rob Citrone, which held a $43 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Some other hedge funds that are bullish include SAC Subsidiary’s Sigma Capital Management, Alec Litowitz and Ross Laser’s Magnetar Capital and Jim Simons’s Renaissance Technologies.

Now, key hedge funds have been driving this bullishness. Magnetar Capital, managed by Alec Litowitz and Ross Laser, initiated the most outsized position in Concho Resources Inc. (NYSE:CXO). Magnetar Capital had 28 million invested in the company at the end of the quarter. Perella Weinberg Partners also made a $4 million investment in the stock during the quarter. The other funds with brand new CXO positions are Cliff Asness’s AQR Capital Management, John Fichthorn’s Dialectic Capital Management, and Jeff Lignelli’s Incline Global Management.

How have insiders been trading Concho Resources Inc. (NYSE:CXO)?

Insider trading activity, especially when it’s bullish, is best served when the company we’re looking at has seen transactions within the past six months. Over the latest 180-day time period, Concho Resources Inc. (NYSE:CXO) has experienced zero unique insiders buying, and 3 insider sales (see the details of insider trades here).

With the results exhibited by the aforementioned research, retail investors should always keep an eye on hedge fund and insider trading sentiment, and Concho Resources Inc. (NYSE:CXO) applies perfectly to this mantra.

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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.