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Hedge Funds Are Dumping Centennial Resource Development, Inc. (CDEV)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Centennial Resource Development, Inc. (NASDAQ:CDEV).

Is Centennial Resource Development, Inc. (NASDAQ:CDEV) a buy, sell, or hold? The best stock pickers are in a bearish mood. The number of bullish hedge fund positions fell by 11 recently. Our calculations also showed that CDEV 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). CDEV was in 18 hedge funds’ portfolios at the end of the first quarter of 2020. There were 29 hedge funds in our database with CDEV positions at the end of the previous quarter.

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

If you’d ask most shareholders, hedge funds are perceived as unimportant, old investment vehicles of the past. While there are more than 8000 funds with their doors open today, Our researchers choose to focus on the aristocrats of this group, approximately 850 funds. These money managers handle the majority of the hedge fund industry’s total capital, and by paying attention to their highest performing stock picks, Insider Monkey has found a few investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually 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 .

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Jim Simons Ffounder of Renaissance Technologies

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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. Now we’re going to take a look at the recent hedge fund action regarding Centennial Resource Development, Inc. (NASDAQ:CDEV).

What does smart money think about Centennial Resource Development, Inc. (NASDAQ:CDEV)?

At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -38% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in CDEV over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Prescott Group Capital Management held the most valuable stake in Centennial Resource Development, Inc. (NASDAQ:CDEV), which was worth $6.2 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $4.3 million worth of shares. SailingStone Capital Partners, Renaissance Technologies, and D E Shaw 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 Prescott Group Capital Management allocated the biggest weight to Centennial Resource Development, Inc. (NASDAQ:CDEV), around 3.08% of its 13F portfolio. SailingStone Capital Partners is also relatively very bullish on the stock, setting aside 0.89 percent of its 13F equity portfolio to CDEV.

Seeing as Centennial Resource Development, Inc. (NASDAQ:CDEV) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there exists a select few fund managers that elected to cut their positions entirely heading into Q4. Intriguingly, Anand Parekh’s Alyeska Investment Group dropped the largest position of the “upper crust” of funds watched by Insider Monkey, valued at close to $16.6 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund said goodbye to about $8.4 million worth. These moves are important to note, as total hedge fund interest fell by 11 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to Centennial Resource Development, Inc. (NASDAQ:CDEV). We will take a look at Delta Apparel, Inc. (NYSE:DLA), Eton Pharmaceuticals, Inc. (NASDAQ:ETON), Galmed Pharmaceuticals Ltd (NASDAQ:GLMD), and Xeris Pharmaceuticals, Inc. (NASDAQ:XERS). This group of stocks’ market values are similar to CDEV’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DLA 4 4188 -1
ETON 4 18066 2
GLMD 10 18167 0
XERS 10 21986 4
Average 7 15602 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $18 million in CDEV’s case. Galmed Pharmaceuticals Ltd (NASDAQ:GLMD) is the most popular stock in this table. On the other hand Delta Apparel, Inc. (NYSE:DLA) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Centennial Resource Development, Inc. (NASDAQ:CDEV) 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 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on CDEV as the stock returned 303% so far in Q2 (through June 22nd) 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.