Here is What Hedge Funds Think About Chesapeake Utilities Corporation (CPK)

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Ackman’s recent Valeant losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Chesapeake Utilities Corporation (NYSE:CPK).

Is Chesapeake Utilities Corporation (NYSE:CPK) an outstanding investment right now? Investors who are in the know are turning bullish. The number of bullish hedge fund positions advanced by 3 in recent months. Chesapeake Utilities Corporation (NYSE:CPK) was in 10 hedge funds’ portfolios at the end of the third quarter of 2015. There were 7 hedge funds in our database with Chesapeake Utilities Corporation (NYSE:CPK) holdings at the end of the previous quarter. 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 National Western Life Group Inc (NASDAQ:NWLI), First Commonwealth Financial (NYSE:FCF), and Cray Inc. (NASDAQ:CRAY) to gather more data points.

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To the average investor, there is a large number of methods that stock market investors employ to appraise stocks. Some of the less utilized methods are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the best hedge fund managers can beat their index-focused peers by a significant amount (see the details here).

With all of this in mind, let’s take a peek at the key action surrounding Chesapeake Utilities Corporation (NYSE:CPK).

How have hedgies been trading Chesapeake Utilities Corporation (NYSE:CPK)?

At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 43% from the previous quarter. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the largest position in Chesapeake Utilities Corporation (NYSE:CPK). Adage Capital Management has a $17 million position in the stock, comprising less than 0.1% of its 13F portfolio. On Adage Capital Management’s heels is Renaissance Technologies, with a $14.1 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Other peers that are bullish encompass Israel Englander’s Millennium Management, Cliff Asness’ AQR Capital Management, and John Overdeck and David Siegel’s Two Sigma Advisors.

Now, specific money managers were breaking ground themselves. Millennium Management established the largest position in Chesapeake Utilities Corporation (NYSE:CPK). Millennium Management had $2.8 million invested in the company at the end of the quarter. D E Shaw also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new CPK investors: Chao Ku’s Nine Chapters Capital Management and Ken Griffin’s Citadel Investment Group.

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. These stocks are National Western Life Group Inc (NASDAQ:NWLI), First Commonwealth Financial (NYSE:FCF), Cray Inc. (NASDAQ:CRAY), and Tutor Perini Corp (NYSE:TPC). This group of stocks’ market values resembles Chesapeake Utilities Corporation (NYSE:CPK)’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NWLI 8 18087 -3
FCF 7 14325 -4
CRAY 12 39364 4
TPC 16 51865 -3

As you can see, these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $39 million in Chesapeake Utilities Corporation (NYSE:CPK)’s case. Tutor Perini Corp (NYSE:TPC) is the most popular stock in this table. On the other hand, First Commonwealth Financial (NYSE:FCF) is the least popular one with only 7 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. In this regard, Tutor Perini Corp (NYSE:TPC) might be a better candidate to consider a long position.