PDC Energy Inc (PDCE): Hedge Funds Taking Some Chips Off The Table

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of PDC Energy Inc (NASDAQ:PDCE) based on that data and determine whether they were really smart about the stock.

PDC Energy Inc (NASDAQ:PDCE) investors should pay attention to a decrease in activity from the world’s largest hedge funds lately. PDC Energy Inc (NASDAQ:PDCE) was in 23 hedge funds’ portfolios at the end of June. The all time high for this statistics is 32. There were 25 hedge funds in our database with PDCE holdings at the end of March. Our calculations also showed that PDCE isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Gavin Saitowitz of Prelude Capital

Gavin Saitowitz of Prelude Capital

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 precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now let’s check out the key hedge fund action surrounding PDC Energy Inc (NASDAQ:PDCE).

How are hedge funds trading PDC Energy Inc (NASDAQ:PDCE)?

At Q2’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PDCE over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Millennium Management was the largest shareholder of PDC Energy Inc (NASDAQ:PDCE), with a stake worth $33.1 million reported as of the end of September. Trailing Millennium Management was Citadel Investment Group, which amassed a stake valued at $30.5 million. Deep Basin Capital, SailingStone Capital Partners, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position SailingStone Capital Partners allocated the biggest weight to PDC Energy Inc (NASDAQ:PDCE), around 9.05% of its 13F portfolio. Lion Point is also relatively very bullish on the stock, dishing out 4.42 percent of its 13F equity portfolio to PDCE.

Judging by the fact that PDC Energy Inc (NASDAQ:PDCE) has witnessed a decline in interest from hedge fund managers, it’s easy to see that there is a sect of funds who sold off their positions entirely heading into Q3. Interestingly, Nathaniel August’s Mangrove Partners said goodbye to the biggest position of the 750 funds tracked by Insider Monkey, valued at an estimated $9.7 million in stock. Steven Baughman’s fund, Divisar Capital, also cut its stock, about $0.8 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 2 funds heading into Q3.

Let’s also examine hedge fund activity in other stocks similar to PDC Energy Inc (NASDAQ:PDCE). These stocks are The ODP Corporation (NASDAQ:ODP), Coeur Mining, Inc. (NYSE:CDE), Heartland Financial USA Inc (NASDAQ:HTLF), Alexander’s, Inc. (NYSE:ALX), Intellia Therapeutics, Inc. (NASDAQ:NTLA), Vivint Solar Inc (NYSE:VSLR), and Getty Realty Corp. (NYSE:GTY). This group of stocks’ market caps are closest to PDCE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ODP 18 107793 1
CDE 14 48945 0
HTLF 5 6042 -1
ALX 8 96144 0
NTLA 17 63292 7
VSLR 12 59197 -4
GTY 7 72271 -2
Average 11.6 64812 0.1

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 $65 million. That figure was $210 million in PDCE’s case. The ODP Corporation (NASDAQ:ODP) is the most popular stock in this table. On the other hand Heartland Financial USA Inc (NASDAQ:HTLF) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks PDC Energy Inc (NASDAQ:PDCE) is more popular among hedge funds. Our overall hedge fund sentiment score for PDCE is 74.6. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. Unfortunately PDCE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on PDCE were disappointed as the stock returned -0.3% 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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