Was The Smart Money Right About QEP Resources Inc (QEP)?

Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. The following article will discuss the smart money sentiment towards QEP Resources Inc (NYSE:QEP).

Is QEP Resources Inc (NYSE:QEP) a bargain? Prominent investors are in an optimistic mood. The number of long hedge fund positions inched up by 2 in recent months. Our calculations also showed that QEP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). QEP was in 23 hedge funds’ portfolios at the end of December. There were 21 hedge funds in our database with QEP holdings at the end of the previous quarter.

If you’d ask most investors, hedge funds are seen as unimportant, old financial tools of yesteryear. While there are over 8000 funds trading today, We choose to focus on the upper echelon of this group, approximately 850 funds. These hedge fund managers handle the majority of all hedge funds’ total capital, and by paying attention to their unrivaled picks, Insider Monkey has found several investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .


Paul Singer of Elliott Management

We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a peek at the new hedge fund action encompassing QEP Resources Inc (NYSE:QEP).

What have hedge funds been doing with QEP Resources Inc (NYSE:QEP)?

At the end of the fourth quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in QEP over the last 18 quarters. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Is QEP A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Paul Singer’s Elliott Management has the largest position in QEP Resources Inc (NYSE:QEP), worth close to $52.7 million, corresponding to 0.4% of its total 13F portfolio. Coming in second is Millennium Management, managed by Israel Englander, which holds a $29.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions contain D. E. Shaw’s D E Shaw, Ken Griffin’s Citadel Investment Group and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Elliott Management allocated the biggest weight to QEP Resources Inc (NYSE:QEP), around 0.44% of its 13F portfolio. Arosa Capital Management is also relatively very bullish on the stock, dishing out 0.33 percent of its 13F equity portfolio to QEP.

As one would reasonably expect, key money managers have jumped into QEP Resources Inc (NYSE:QEP) headfirst. Renaissance Technologies, created the most valuable position in QEP Resources Inc (NYSE:QEP). Renaissance Technologies had $13 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also initiated a $9 million position during the quarter. The other funds with brand new QEP positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Till Bechtolsheimer’s Arosa Capital Management, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.

Let’s check out hedge fund activity in other stocks similar to QEP Resources Inc (NYSE:QEP). We will take a look at Cornerstone Building Brands, Inc. (NYSE:CNR), Celestica Inc. (NYSE:CLS), Tenneco Inc (NYSE:TEN), and National Western Life Insurance Company (NASDAQ:NWLI). This group of stocks’ market caps are similar to QEP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CNR 26 114336 8
CLS 13 97259 0
TEN 21 143149 8
NWLI 6 15097 -3
Average 16.5 92460 3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $92 million. That figure was $194 million in QEP’s case. Cornerstone Building Brands, Inc. (NYSE:CNR) is the most popular stock in this table. On the other hand National Western Life Insurance Company (NASDAQ:NWLI) is the least popular one with only 6 bullish hedge fund positions. QEP Resources Inc (NYSE:QEP) 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 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately QEP wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on QEP were disappointed as the stock returned -79.4% during the same time period 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 many of these stocks already outperformed the market so far this year.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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