Is Centennial Resource Development, Inc. (NASDAQ:CDEV) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Centennial Resource Development, Inc. (NASDAQ:CDEV) investors should pay attention to a decrease in activity from the world’s largest hedge funds in recent months. CDEV was in 14 hedge funds’ portfolios at the end of December. There were 21 hedge funds in our database with CDEV positions at the end of the previous quarter. Our calculations also showed that cdev isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a lot of methods market participants employ to analyze their holdings. Some of the most underrated methods are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the elite fund managers can outclass the broader indices by a healthy amount (see the details here).
Michael Lowenstein of Kensico Capital
We’re going to check out the latest hedge fund action encompassing Centennial Resource Development, Inc. (NASDAQ:CDEV).
Hedge fund activity in Centennial Resource Development, Inc. (NASDAQ:CDEV)
Heading into the first quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards CDEV over the last 14 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, MacKenzie B. Davis and Kenneth L. Settles Jr’s SailingStone Capital Partners has the number one position in Centennial Resource Development, Inc. (NASDAQ:CDEV), worth close to $60.6 million, comprising 3.9% of its total 13F portfolio. The second most bullish fund manager is Michael Lowenstein of Kensico Capital, with a $42 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism include Anand Parekh’s Alyeska Investment Group, Noam Gottesman’s GLG Partners and John Overdeck and David Siegel’s Two Sigma Advisors.
Because Centennial Resource Development, Inc. (NASDAQ:CDEV) has faced declining sentiment from hedge fund managers, we can see that there exists a select few money managers that decided to sell off their full holdings by the end of the third quarter. At the top of the heap, Todd J. Kantor’s Encompass Capital Advisors cut the largest investment of the 700 funds followed by Insider Monkey, valued at close to $25.8 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also dumped its stock, about $6.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 7 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Centennial Resource Development, Inc. (NASDAQ:CDEV) but similarly valued. These stocks are UMB Financial Corporation (NASDAQ:UMBF), Array Biopharma Inc (NASDAQ:ARRY), First Hawaiian, Inc. (NASDAQ:FHB), and Investors Bancorp, Inc. (NASDAQ:ISBC). All of these stocks’ market caps match CDEV’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UMBF | 11 | 49606 | 0 |
| ARRY | 31 | 787434 | 1 |
| FHB | 21 | 276809 | -7 |
| ISBC | 27 | 650714 | -6 |
| Average | 22.5 | 441141 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $441 million. That figure was $137 million in CDEV’s case. Array Biopharma Inc (NASDAQ:ARRY) is the most popular stock in this table. On the other hand UMB Financial Corporation (NASDAQ:UMBF) is the least popular one with only 11 bullish hedge fund positions. Centennial Resource Development, Inc. (NASDAQ:CDEV) 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. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately CDEV wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); CDEV investors were disappointed as the stock returned -2% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
