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Is Callon Petroleum Company (CPE) A Good Stock To Buy?

After several tireless days we have finished crunching the numbers from the more than 700 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Callon Petroleum Company (NYSE:CPE).

Callon Petroleum Company (NYSE:CPE) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 26 hedge funds’ portfolios at the end of the third quarter of 2018. At the end of this article we will also compare CPE to other stocks including Switch, Inc. (NYSE:SWCH), Visteon Corp (NYSE:VC), and argenx SE (NASDAQ:ARGX) to get a better sense of its popularity.

According to most stock holders, hedge funds are viewed as worthless, old investment tools of the past. While there are more than 8,000 funds with their doors open at the moment, We look at the crème de la crème of this group, about 700 funds. It is estimated that this group of investors have their hands on the majority of the smart money’s total capital, and by monitoring their best picks, Insider Monkey has found a few investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship hedge fund strategy outperformed the S&P 500 index by 6 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.

Phill Gross, Adage Capital Management

We’re going to take a look at the new hedge fund action encompassing Callon Petroleum Company (NYSE:CPE).

How have hedgies been trading Callon Petroleum Company (NYSE:CPE)?

At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, no change from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in CPE at the beginning of this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

CPE_dec2018

The largest stake in Callon Petroleum Company (NYSE:CPE) was held by Luminus Management, which reported holding $66.6 million worth of stock at the end of September. It was followed by Cardinal Capital with a $61.2 million position. Other investors bullish on the company included Adage Capital Management, Fisher Asset Management, and Columbus Circle Investors.

Because Callon Petroleum Company (NYSE:CPE) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there were a few hedge funds that slashed their entire stakes by the end of the third quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the biggest stake of all the hedgies followed by Insider Monkey, worth close to $3.5 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund dropped about $2.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Callon Petroleum Company (NYSE:CPE) but similarly valued. We will take a look at Switch, Inc. (NYSE:SWCH), Visteon Corp (NYSE:VC), argenx SE (NASDAQ:ARGX), and DSW Inc. (NYSE:DSW). This group of stocks’ market valuations resemble CPE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SWCH 12 161271 3
VC 22 354194 -6
ARGX 34 612491 11
DSW 27 277884 4
Average 23.75 351460 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $351 million. That figure was $341 million in CPE’s case. argenx SE (NASDAQ:ARGX) is the most popular stock in this table. On the other hand Switch, Inc. (NYSE:SWCH) is the least popular one with only 12 bullish hedge fund positions. Callon Petroleum Company (NYSE:CPE) 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 ARGX might be a better candidate to consider a long position.

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

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