Is Chesapeake Utilities Corporation (CPK) Worthy of Your Portfolio?

Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

In this article, we’ll discuss the latest  hedge fund activity surrounding Chesapeake Utilities Corporation (NYSE:CPK). Among the funds in our database, the number of investors bullish on Chesapeake Utilities Corporation declined by two last quarter. However, the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as ScanSource, Inc. (NASDAQ:SCSC), Brooks Automation, Inc. (USA) (NASDAQ:BRKS), and HudBay Minerals Inc Ord Shs (NYSE:HBM) to gather more data points.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

With all of this in mind, we’re going to view the key action encompassing Chesapeake Utilities Corporation (NYSE:CPK).

How have hedgies been trading Chesapeake Utilities Corporation (NYSE:CPK)?

Heading into the fourth quarter of 2016, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, down by 17% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in CPK at the beginning of 2016. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Phill Gross and Robert Atchinson’s Adage Capital Management has the number one position in Chesapeake Utilities Corporation (NYSE:CPK), worth close to $18.1 million, amounting to less than 0.1%% of its total 13F portfolio. Coming in second is Renaissance Technologies, one of the largest hedge funds in the world with a $14.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers with similar optimism contain Israel Englander’s Millennium Management, Paul Tudor Jones’ Tudor Investment Corp, and Cliff Asness’ AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually cut their positions entirely. Intriguingly, Michael Platt and William Reeves’ BlueCrest Capital Mgmt. cut the largest position of the 700 funds tracked by Insider Monkey, valued at close to $0.5 million in stock. Glenn Russell Dubin’s fund, Highbridge Capital Management, also cut its stock, about $0.2 million worth.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Chesapeake Utilities Corporation (NYSE:CPK) but similarly valued. These stocks are ScanSource, Inc. (NASDAQ:SCSC), Brooks Automation, Inc. (USA) (NASDAQ:BRKS), HudBay Minerals Inc Ord Shs (NYSE:HBM), and Himax Technologies, Inc. (ADR) (NASDAQ:HIMX). This group of stocks’ market caps match CPK’s market cap.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $94 million, versus $44 million in CPK’s case. Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) is  by far the most popular stock in this table, while HudBay Minerals Inc Ord Shs (NYSE:HBM) is the least popular one with only nine funds having reported long 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. In this regard Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) might be a better candidate to consider taking a long position in.

Disclosure: none