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PDC Energy Inc (PDCE): Weak Hands Are Selling

In this article you are going to find out whether hedge funds think PDC Energy Inc (NASDAQ:PDCE) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

PDC Energy Inc (NASDAQ:PDCE) has seen a decrease in enthusiasm from smart money in recent months. PDCE was in 25 hedge funds’ portfolios at the end of the first quarter of 2020. There were 32 hedge funds in our database with PDCE positions at the end of the previous quarter. Our calculations also showed that PDCE isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

At the moment there are a multitude of tools investors use to evaluate publicly traded companies. A couple of the most useful tools are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the best investment managers can outpace the S&P 500 by a healthy amount (see the details here).

Ken Fisher FISHER ASSET MANAGEMENT

Ken Fisher of Fisher Asset Management

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the fresh hedge fund action surrounding PDC Energy Inc (NASDAQ:PDCE).

How have hedgies been trading PDC Energy Inc (NASDAQ:PDCE)?

Heading into the second quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PDCE over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Citadel Investment Group was the largest shareholder of PDC Energy Inc (NASDAQ:PDCE), with a stake worth $22.2 million reported as of the end of September. Trailing Citadel Investment Group was SailingStone Capital Partners, which amassed a stake valued at $13.1 million. Deep Basin Capital, Point72 Asset Management, 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 7.35% of its 13F portfolio. SIR Capital Management is also relatively very bullish on the stock, setting aside 2.99 percent of its 13F equity portfolio to PDCE.

Judging by the fact that PDC Energy Inc (NASDAQ:PDCE) has witnessed falling interest from the smart money, it’s easy to see that there exists a select few hedgies that slashed their positions entirely last quarter. Intriguingly, George McCabe’s Portolan Capital Management dumped the largest stake of all the hedgies tracked by Insider Monkey, worth about $10.8 million in stock. Robert Emil Zoellner’s fund, Alpine Associates, also dumped its stock, about $3.5 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 7 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to PDC Energy Inc (NASDAQ:PDCE). We will take a look at Oxford Industries, Inc. (NYSE:OXM), Bloom Energy Corporation (NYSE:BE), Cara Therapeutics Inc (NASDAQ:CARA), and Simulations Plus, Inc. (NASDAQ:SLP). This group of stocks’ market caps match PDCE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OXM 12 27638 0
BE 10 44648 -3
CARA 10 84410 -7
SLP 10 35925 -2
Average 10.5 48155 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $115 million in PDCE’s case. Oxford Industries, Inc. (NYSE:OXM) is the most popular stock in this table. On the other hand Bloom Energy Corporation (NYSE:BE) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks PDC Energy Inc (NASDAQ:PDCE) is more popular among hedge funds. 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 returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on PDCE as the stock returned 148.5% so far in Q2 (through June 10th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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