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Hedge Funds Are Downgrading Chesapeake Utilities Corporation (CPK)

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Chesapeake Utilities Corporation (NYSE:CPK) based on that data.

Is Chesapeake Utilities Corporation (NYSE:CPK) a good investment now? The smart money is taking a bearish view. The number of long hedge fund positions went down by 1 lately. Our calculations also showed that CPK 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). CPK was in 7 hedge funds’ portfolios at the end of the first quarter of 2020. There were 8 hedge funds in our database with CPK holdings at the end of the previous quarter.

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

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David Harding

David Harding of Winton Capital Management

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 stocks recommended/scorned by legendary Bill Miller. 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 take a look at the fresh hedge fund action surrounding Chesapeake Utilities Corporation (NYSE:CPK).

How are hedge funds trading Chesapeake Utilities Corporation (NYSE:CPK)?

Heading into the second quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the fourth quarter of 2019. On the other hand, there were a total of 11 hedge funds with a bullish position in CPK a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Chesapeake Utilities Corporation (NYSE:CPK) was held by Renaissance Technologies, which reported holding $18.1 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $4.1 million position. Other investors bullish on the company included Two Sigma Advisors, Engineers Gate Manager, and GAMCO Investors. In terms of the portfolio weights assigned to each position Engineers Gate Manager allocated the biggest weight to Chesapeake Utilities Corporation (NYSE:CPK), around 0.07% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to CPK.

Since Chesapeake Utilities Corporation (NYSE:CPK) has faced a decline in interest from the smart money, it’s easy to see that there was a specific group of hedgies who sold off their positions entirely by the end of the first quarter. At the top of the heap, Israel Englander’s Millennium Management sold off the largest investment of the 750 funds monitored by Insider Monkey, totaling about $9.2 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also sold off its stock, about $0.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 1 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Chesapeake Utilities Corporation (NYSE:CPK) but similarly valued. We will take a look at KEMET Corporation (NYSE:KEM), Urban Outfitters, Inc. (NASDAQ:URBN), SSR Mining Inc. (NASDAQ:SSRM), and Fanhua Inc. (NASDAQ:FANH). This group of stocks’ market values are similar to CPK’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KEM 18 230546 -3
URBN 23 98855 -11
SSRM 22 152203 6
FANH 5 4287 -2
Average 17 121473 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $121 million. That figure was $26 million in CPK’s case. Urban Outfitters, Inc. (NASDAQ:URBN) is the most popular stock in this table. On the other hand Fanhua Inc. (NASDAQ:FANH) is the least popular one with only 5 bullish hedge fund positions. Chesapeake Utilities Corporation (NYSE:CPK) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately CPK wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CPK investors were disappointed as the stock returned 3.1% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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