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Is Chesapeake Utilities Corporation (CPK) Going to Burn These Hedge Funds?

The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of June 28. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Chesapeake Utilities Corporation (NYSE:CPK).

Chesapeake Utilities Corporation (NYSE:CPK) has seen a decrease in support from the world’s most elite money managers recently. CPK was in 9 hedge funds’ portfolios at the end of the second quarter of 2019. There were 11 hedge funds in our database with CPK positions at the end of the previous quarter. Our calculations also showed that CPK isn’t among the 30 most popular stocks among hedge funds (see 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

CPK_oct2019

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 analyze the recent hedge fund action regarding Chesapeake Utilities Corporation (NYSE:CPK).

What does smart money think about Chesapeake Utilities Corporation (NYSE:CPK)?

At Q2’s end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CPK over the last 16 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

GAMCO Investors, Mario Gabelli

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the number one position in Chesapeake Utilities Corporation (NYSE:CPK). Renaissance Technologies has a $27.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Israel Englander of Millennium Management, with a $6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish contain Cliff Asness’s AQR Capital Management, Ken Griffin’s Citadel Investment Group and Mario Gabelli’s GAMCO Investors.

Because Chesapeake Utilities Corporation (NYSE:CPK) has experienced falling interest from hedge fund managers, we can see that there lies a certain “tier” of hedgies who sold off their entire stakes by the end of the second quarter. At the top of the heap, Michael Platt and William Reeves’s BlueCrest Capital Mgmt. cut the biggest position of all the hedgies followed by Insider Monkey, valued at an estimated $0.3 million in stock, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital was right behind this move, as the fund dropped about $0.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 2 funds by the end of the second quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Chesapeake Utilities Corporation (NYSE:CPK) but similarly valued. We will take a look at MSG Networks Inc (NYSE:MSGN), Atrion Corporation (NASDAQ:ATRI), State Auto Financial Corporation (NASDAQ:STFC), and The RMR Group Inc. (NASDAQ:RMR). This group of stocks’ market caps are similar to CPK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MSGN 23 270279 2
ATRI 11 95715 3
STFC 7 23214 2
RMR 22 206825 2
Average 15.75 149008 2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $38 million in CPK’s case. MSG Networks Inc (NYSE:MSGN) is the most popular stock in this table. On the other hand State Auto Financial Corporation (NASDAQ:STFC) is the least popular one with only 7 bullish hedge fund positions. Chesapeake Utilities Corporation (NYSE:CPK) 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 CPK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CPK investors were disappointed as the stock returned 0.7% 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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