Hedge Fund Darlings vs. Continental Resources, Inc. (CLR) In 2019

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Continental Resources, Inc. (NYSE:CLR) and compare its performance to hedge funds’ consensus picks in 2019.

Continental Resources, Inc. (NYSE:CLR) shareholders have witnessed an increase in hedge fund sentiment in recent months. Our calculations also showed that CLR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

According to most traders, hedge funds are viewed as worthless, outdated financial tools of years past. While there are over 8000 funds in operation at present, We look at the crème de la crème of this group, about 750 funds. These investment experts manage the lion’s share of the smart money’s total capital, and by observing their matchless investments, Insider Monkey has come up with various investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .


Paul Tudor Jones of Tudor Investment Corp

We leave no stone unturned when looking for the next great investment idea. For example one of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Now we’re going to check out the new hedge fund action regarding Continental Resources, Inc. (NYSE:CLR).

How are hedge funds trading Continental Resources, Inc. (NYSE:CLR)?

Heading into the fourth quarter of 2019, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CLR over the last 17 quarters. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

The largest stake in Continental Resources, Inc. (NYSE:CLR) was held by D E Shaw, which reported holding $122.7 million worth of stock at the end of September. It was followed by Point72 Asset Management with a $42.3 million position. Other investors bullish on the company included Impala Asset Management, Encompass Capital Advisors, and SIR Capital Management. In terms of the portfolio weights assigned to each position SIR Capital Management allocated the biggest weight to Continental Resources, Inc. (NYSE:CLR), around 7.53% of its 13F portfolio. Impala Asset Management is also relatively very bullish on the stock, designating 2.72 percent of its 13F equity portfolio to CLR.

As aggregate interest increased, key hedge funds were leading the bulls’ herd. Impala Asset Management, managed by Robert Bishop, established the largest position in Continental Resources, Inc. (NYSE:CLR). Impala Asset Management had $37.6 million invested in the company at the end of the quarter. Todd J. Kantor’s Encompass Capital Advisors also made a $33.8 million investment in the stock during the quarter. The other funds with brand new CLR positions are Michael Hintze’s CQS Cayman LP, Guy Shahar’s DSAM Partners, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Continental Resources, Inc. (NYSE:CLR) but similarly valued. We will take a look at Alleghany Corporation (NYSE:Y), C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), Raymond James Financial, Inc. (NYSE:RJF), and Arconic Inc. (NYSE:ARNC). This group of stocks’ market valuations resemble CLR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
Y 26 404893 0
CHRW 23 300442 3
RJF 27 793083 -8
ARNC 34 3136590 -8
Average 27.5 1158752 -3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $1159 million. That figure was $435 million in CLR’s case. Arconic Inc. (NYSE:ARNC) is the most popular stock in this table. On the other hand C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Continental Resources, Inc. (NYSE:CLR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately CLR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CLR were disappointed as the stock returned -14.7% so far in 2019 (through 12/23) and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks already outperformed the market in 2019.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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