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Hedge Funds Are Warming Up To Continental Resources, Inc. (CLR)

Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds’ top 20 stock picks easily bested the broader market, at 37.4% compared to 27.5%, despite there being a few duds in there like Berkshire Hathaway (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.

Continental Resources, Inc. (NYSE:CLR) investors should be aware of an increase in enthusiasm from smart money lately. CLR was in 37 hedge funds’ portfolios at the end of September. There were 34 hedge funds in our database with CLR holdings at the end of the previous quarter. 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 below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

According to most stock holders, hedge funds are viewed as slow, outdated financial vehicles of the past. While there are more than 8000 funds trading at present, Our researchers hone in on the top tier of this group, around 750 funds. Most estimates calculate that this group of people preside over the lion’s share of the smart money’s total capital, and by keeping track of their best picks, Insider Monkey has spotted numerous investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points a 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 .

Michael Hintze CQS Capital

Michael Hintze of CQS Capital

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the key hedge fund action surrounding Continental Resources, Inc. (NYSE:CLR).

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

At the end of the third quarter, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from one quarter earlier. By comparison, 29 hedge funds held shares or bullish call options in CLR a year ago. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

CLR_dec2019

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 portfolio. Impala Asset Management is also relatively very bullish on the stock, setting aside 2.72 percent of its 13F equity portfolio to CLR.

As aggregate interest increased, specific money managers have jumped into Continental Resources, Inc. (NYSE:CLR) headfirst. Impala Asset Management, managed by Robert Bishop, initiated the biggest 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 initiated a $33.8 million position 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 go over hedge fund activity in other stocks similar to Continental Resources, Inc. (NYSE:CLR). 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 caps are similar to CLR’s market cap.

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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 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 0.4% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

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