Is Callon Petroleum Company (CPE) Going To Burn These Hedge Funds ?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. 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 Callon Petroleum Company (NYSE:CPE).

Is Callon Petroleum Company (NYSE:CPE) going to take off soon? The smart money is taking an optimistic view. The number of long hedge fund bets went up by 16 recently. Our calculations also showed that CPE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). CPE was in 28 hedge funds’ portfolios at the end of the third quarter of 2019. There were 12 hedge funds in our database with CPE positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are a large number of metrics shareholders use to evaluate publicly traded companies. A pair of the most under-the-radar metrics are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the top money managers can outclass the broader indices by a healthy amount (see the details here).


John Paulson of Paulson & Co

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. We’re going to analyze the recent hedge fund action encompassing Callon Petroleum Company (NYSE:CPE).

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

Heading into the fourth quarter of 2019, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 133% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in CPE a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).


The largest stake in Callon Petroleum Company (NYSE:CPE) was held by Paulson & Co, which reported holding $93.7 million worth of stock at the end of September. It was followed by AQR Capital Management with a $56.9 million position. Other investors bullish on the company included Luminus Management, Deep Basin Capital, and Fisher Asset Management. In terms of the portfolio weights assigned to each position Farmstead Capital Management allocated the biggest weight to Callon Petroleum Company (NYSE:CPE), around 5.44% of its portfolio. Deep Basin Capital is also relatively very bullish on the stock, dishing out 2.42 percent of its 13F equity portfolio to CPE.

Consequently, specific money managers were breaking ground themselves. Paulson & Co, managed by John Paulson, established the largest position in Callon Petroleum Company (NYSE:CPE). Paulson & Co had $93.7 million invested in the company at the end of the quarter. Matt Smith’s Deep Basin Capital also made a $30.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, Carl Tiedemann and Michael Tiedemann’s TIG Advisors, and Clint Carlson’s Carlson Capital.

Let’s check out hedge fund activity in other stocks similar to Callon Petroleum Company (NYSE:CPE). These stocks are Kadant Inc. (NYSE:KAI), ARMOUR Residential REIT, Inc. (NYSE:ARR), AtriCure Inc. (NASDAQ:ATRC), and Fitbit Inc (NYSE:FIT). This group of stocks’ market valuations are similar to CPE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KAI 12 72191 1
ARR 11 69052 3
ATRC 19 87624 -1
FIT 9 69023 -4
Average 12.75 74473 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $383 million in CPE’s case. AtriCure Inc. (NASDAQ:ATRC) is the most popular stock in this table. On the other hand Fitbit Inc (NYSE:FIT) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Callon Petroleum Company (NYSE:CPE) 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 CPE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CPE were disappointed as the stock returned -15.9% 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.