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Is Centennial Resource Development, Inc. (CDEV) 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 October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 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 Centennial Resource Development, Inc. (NASDAQ:CDEV).

Centennial Resource Development, Inc. (NASDAQ:CDEV) has seen an increase in support from the world’s most elite money managers lately. CDEV was in 17 hedge funds’ portfolios at the end of the second quarter of 2019. There were 15 hedge funds in our database with CDEV holdings at the end of the previous quarter. Our calculations also showed that CDEV isn’t among the 30 most popular stocks among hedge funds (view the video below).
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 financial world there are tons of gauges investors have at their disposal to assess their holdings. Two of the best gauges are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the best money managers can outperform the S&P 500 by a healthy amount (see the details here).

Michael Lowenstein Kensico Capital

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the latest hedge fund action regarding Centennial Resource Development, Inc. (NASDAQ:CDEV).

Hedge fund activity in Centennial Resource Development, Inc. (NASDAQ:CDEV)

At the end of the second quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in CDEV a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

No of Hedge Funds with CDEV Positions

More specifically, Kensico Capital was the largest shareholder of Centennial Resource Development, Inc. (NASDAQ:CDEV), with a stake worth $40.8 million reported as of the end of March. Trailing Kensico Capital was SailingStone Capital Partners, which amassed a stake valued at $39.6 million. Citadel Investment Group, Millennium Management, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.

As industrywide interest jumped, specific money managers were leading the bulls’ herd. Carlson Capital, managed by Clint Carlson, initiated the biggest position in Centennial Resource Development, Inc. (NASDAQ:CDEV). Carlson Capital had $4.5 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $4.5 million position during the quarter. The other funds with brand new CDEV positions are Vince Maddi and Shawn Brennan’s SIR Capital Management, Paul Tudor Jones’s Tudor Investment Corp, and Benjamin A. Smith’s Laurion Capital Management.

Let’s now review 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 Myriad Genetics, Inc. (NASDAQ:MYGN), M.D.C. Holdings, Inc. (NYSE:MDC), ProPetro Holding Corp. (NYSE:PUMP), and Cubic Corporation (NYSE:CUB). All of these stocks’ market caps are similar to CDEV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MYGN 15 214253 -2
MDC 17 81899 0
PUMP 24 206397 3
CUB 19 54795 4
Average 18.75 139336 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $139 million. That figure was $143 million in CDEV’s case. ProPetro Holding Corp. (NYSE:PUMP) is the most popular stock in this table. On the other hand Myriad Genetics, Inc. (NASDAQ:MYGN) is the least popular one with only 15 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CDEV wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CDEV investors were disappointed as the stock returned -40.5% during the third 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 many of these stocks already outperformed the market so far in 2019.

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

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