Is HighPoint Resources Corporation (HPR) Going to Burn These Hedge Funds?

Is HighPoint Resources Corporation (NYSE:HPR) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

HighPoint Resources Corporation (NYSE:HPR) was in 10 hedge funds’ portfolios at the end of September. HPR shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. There were 8 hedge funds in our database with HPR holdings at the end of the previous quarter. Our calculations also showed that HPR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Jim Simons of Renaissance Technologies

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a glance at the latest hedge fund action encompassing HighPoint Resources Corporation (NYSE:HPR).

What does smart money think about HighPoint Resources Corporation (NYSE:HPR)?

At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in HPR over the last 17 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Is HPR A Good Stock To Buy?

The largest stake in HighPoint Resources Corporation (NYSE:HPR) was held by Divisar Capital, which reported holding $17.8 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $13.4 million position. Other investors bullish on the company included Nokomis Capital, Huber Capital Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Divisar Capital allocated the biggest weight to HighPoint Resources Corporation (NYSE:HPR), around 5.93% of its 13F portfolio. Nokomis Capital is also relatively very bullish on the stock, setting aside 0.99 percent of its 13F equity portfolio to HPR.

Now, some big names were breaking ground themselves. Paloma Partners, managed by Donald Sussman, created the largest position in HighPoint Resources Corporation (NYSE:HPR). Paloma Partners had $0 million invested in the company at the end of the quarter. Roger Ibbotson’s Zebra Capital Management also initiated a $0 million position during the quarter.

Let’s go over hedge fund activity in other stocks similar to HighPoint Resources Corporation (NYSE:HPR). These stocks are Allied Motion Technologies, Inc. (NASDAQ:AMOT), Ashford Hospitality Trust, Inc. (NYSE:AHT), Secoo Holding Limited (NASDAQ:SECO), and Cadiz Inc (NASDAQ:CDZI). All of these stocks’ market caps match HPR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMOT 12 32566 0
AHT 11 30043 0
SECO 4 19683 -3
CDZI 5 44191 -4
Average 8 31621 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $39 million in HPR’s case. Allied Motion Technologies, Inc. (NASDAQ:AMOT) is the most popular stock in this table. On the other hand Secoo Holding Limited (NASDAQ:SECO) is the least popular one with only 4 bullish hedge fund positions. HighPoint Resources Corporation (NYSE:HPR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately HPR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HPR were disappointed as the stock returned -21.4% during the fourth quarter (through the end of November) 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 this year.

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