Is Continental Resources (CLR) A Wise Investment Choice?

Smead Capital Management, an investment management firm, published its “Smead Value Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. For the third quarter, the Smead Value Fund (SMVLX) gained 0.44% versus a gain of 0.58% for the S&P 500 Index and a loss of 0.78% for the Russell 1000 Value Index. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Smead Capital Management, in its Q3 2021 investor letter, mentioned Continental Resources, Inc. (NYSE: CLR) and discussed its stance on the firm. Continental Resources, Inc. is an Oklahoma City, Oklahoma-based petroleum and natural gas exploration company with a $17.8 billion market capitalization. CLR delivered a 198.90% return since the beginning of the year, while its 12-month returns are up by 236.46%. The stock closed at $48.72 per share on November 9, 2010.

Here is what Smead Capital Management has to say about Continental Resources, Inc. in its Q3 2021 investor letter:

“Oil stocks dominated our winners for the quarter. Continental Resources (CLR) rose 21.82% as the stock market had to reprice future cash flows on higher energy prices.”

Based on our calculations, Continental Resources, Inc. (NYSE: CLR) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. CLR was in 23 hedge fund portfolios at the end of the first half of 2021, compared to 23 funds in the previous quarter. Continental Resources, Inc. (NYSE: CLR) delivered a 31.71% return in the past 3 months.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 115 percentage points since March 2017 (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.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. Recently we came across a high-growth stock that has tons of hidden assets and is trading at an extremely cheap valuation. We go through lists like the 10 best growth stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.

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