Is CPG A Good Stock To Buy Now?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Crescent Point Energy Corp (NYSE:CPG).

Is CPG a good stock to buy now? Hedge funds were taking a bullish view. The number of long hedge fund bets increased by 2 recently. Crescent Point Energy Corp (NYSE:CPG) was in 11 hedge funds’ portfolios at the end of September. The all time high for this statistics is 18. Our calculations also showed that CPG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jonathan Barrett Luminus Management

Jonathan Barrett of Luminus Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now let’s review the key hedge fund action encompassing Crescent Point Energy Corp (NYSE:CPG).

Do Hedge Funds Think CPG Is A Good Stock To Buy Now?

At third quarter’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in CPG a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Crescent Point Energy Corp (NYSE:CPG) was held by Luminus Management, which reported holding $10.9 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $4 million position. Other investors bullish on the company included Renaissance Technologies, D E Shaw, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Luminus Management allocated the biggest weight to Crescent Point Energy Corp (NYSE:CPG), around 2.51% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to CPG.

Consequently, specific money managers have been driving this bullishness. Luminus Management, managed by Jonathan Barrett and Paul Segal, assembled the most valuable position in Crescent Point Energy Corp (NYSE:CPG). Luminus Management had $10.9 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $3.8 million position during the quarter. The only other fund with a new position in the stock is Israel Englander’s Millennium Management.

Let’s check out hedge fund activity in other stocks similar to Crescent Point Energy Corp (NYSE:CPG). We will take a look at HighPeak Energy, Inc. (NASDAQ:HPK), Kearny Financial Corp. (NASDAQ:KRNY), Bristow Group, Inc. (NYSE:VTOL), Arch Resources, Inc. (NYSE:ARCH), Magic Software Enterprises Ltd. (NASDAQ:MGIC), Winmark Corporation (NASDAQ:WINA), and HealthStream, Inc. (NASDAQ:HSTM). All of these stocks’ market caps are similar to CPG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HPK 1 87 1
KRNY 18 75155 -3
VTOL 8 190744 -4
ARCH 26 211647 8
MGIC 4 9602 1
WINA 10 81784 -3
HSTM 14 57652 -3
Average 11.6 89524 -0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.6 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $24 million in CPG’s case. Arch Resources, Inc. (NYSE:ARCH) is the most popular stock in this table. On the other hand HighPeak Energy, Inc. (NASDAQ:HPK) is the least popular one with only 1 bullish hedge fund positions. Crescent Point Energy Corp (NYSE:CPG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CPG is 45.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on CPG as the stock returned 88.5% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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