Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards Antero Resources Corp (NYSE:AR).
Is Antero Resources Corp (NYSE:AR) going to take off soon? Hedge funds are taking a bearish view and the number of investors bullish on the stock slid by 11 recently. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Comerica Incorporated (NYSE:CMA), Splunk Inc (NASDAQ:SPLK), and Alaska Air Group, Inc. (NYSE:ALK) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Now, we’re going to take a look at the latest action surrounding Antero Resources Corp (NYSE:AR).
How have hedgies been trading Antero Resources Corp (NYSE:AR)?
Heading into the fourth quarter of 2016, 40 funds tracked by Insider Monkey held long positions in this stock, down by 22% over the quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Seth Klarman’s Baupost Group has the number one position in Antero Resources Corp (NYSE:AR), worth close to $390.9 million, amounting to 5.6% of its total 13F portfolio. Sitting at the No. 2 spot is FPR Partners, managed by Bob Peck and Andy Raab, which holds a $291.5 million position; 6.6% of its 13F portfolio is allocated to the company. Some other professional money managers that are bullish contain Glenn Greenberg’s Brave Warrior Capital, Ross Margolies’ Stelliam Investment Management, and Cliff Asness’ AQR Capital Management.
Due to the fact that Antero Resources Corp (NYSE:AR) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there were a few money managers who sold off their entire stakes by the end of the third quarter. Intriguingly, Christopher James’s Partner Fund Management said goodbye to the biggest stake of the 700 funds monitored by Insider Monkey, valued at close to $45.6 million in stock. Stuart J. Zimmer’s fund, Zimmer Partners, also dumped its stock, about $26 million worth.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Antero Resources Corp (NYSE:AR) but similarly valued. We will take a look at Comerica Incorporated (NYSE:CMA), Splunk Inc (NASDAQ:SPLK), Alaska Air Group, Inc. (NYSE:ALK), and Open Text Corporation (USA) (NASDAQ:OTEX). All of these stocks’ market caps match AR’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 32 hedge funds with bullish positions at the end of September and the average amount invested in these stocks was $658 million. That figure was $1.58 billion in AR’s case. Comerica Incorporated (NYSE:CMA) is the most popular stock in this table, while Open Text Corporation (USA) (NASDAQ:OTEX) is the least popular one with only 20 investors long the stock. Antero Resources Corp (NYSE:AR) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Comerica Incorporated (NYSE:CMA) might be a better candidate to consider a long position.