It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Cloud Peak Energy Inc. (NYSE:CLD).
Cloud Peak Energy Inc. (NYSE:CLD) was in 13 hedge funds’ portfolios at the end of September. CLD has seen an increase in enthusiasm from smart money recently. There were 8 hedge funds in our database with CLD positions 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 PennyMac Mortgage Investment Trust (NASDAQ:PMTS), Tucows Inc. (USA) (NASDAQ:TCX), and Western Ast Clymr Infl Lkd Sc & Incm Fd (NYSE:WIA) to gather more data points.
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
Now, let’s analyze the recent action encompassing Cloud Peak Energy Inc. (NYSE:CLD).
How are hedge funds trading Cloud Peak Energy Inc. (NYSE:CLD)?
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a boost of 63% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CLD over the last 5 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Kopernik Global Investors, led by David Iben, holds the most valuable position in Cloud Peak Energy Inc. (NYSE:CLD). According to regulatory filings, the fund has a $16.9 million position in the stock, comprising 3.6% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, one of the largest hedge funds in the world, which holds a $9.2 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions contain Kurt Billick’s Bocage Capital, Jos Shaver’s Electron Capital Partners and Robert Bishop’s Impala Asset Management. We’d like to point out an extraordinary observation. Three of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.