Where Do Hedge Funds Stand On Cimarex Energy Co (XEC)?

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Cimarex Energy Co (NYSE:XEC).

Cimarex Energy Co (NYSE:XEC) was in 39 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 43. XEC shareholders have witnessed an increase in hedge fund sentiment of late. There were 34 hedge funds in our database with XEC holdings at the end of December. Our calculations also showed that XEC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to take a glance at the new hedge fund action encompassing Cimarex Energy Co (NYSE:XEC).

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

At the end of the first quarter, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in XEC over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Cimarex Energy Co (NYSE:XEC) was held by Adage Capital Management, which reported holding $190.1 million worth of stock at the end of December. It was followed by Diamond Hill Capital with a $116.8 million position. Other investors bullish on the company included Marshall Wace LLP, D E Shaw, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position 0 allocated the biggest weight to Cimarex Energy Co (NYSE:XEC), around 6.55% of its 13F portfolio. 0 is also relatively very bullish on the stock, earmarking 3.49 percent of its 13F equity portfolio to XEC.

As aggregate interest increased, key hedge funds have jumped into Cimarex Energy Co (NYSE:XEC) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the most outsized position in Cimarex Energy Co (NYSE:XEC). Marshall Wace LLP had $74.3 million invested in the company at the end of the quarter. Kevin Michael Ulrich and Anthony Davis’s Anchorage Advisors also made a $32.7 million investment in the stock during the quarter. The other funds with brand new XEC positions are Chuck Royce’s Royce & Associates, Dmitry Balyasny’s Balyasny Asset Management, and Michael Gelband’s ExodusPoint Capital.

Let’s check out hedge fund activity in other stocks similar to Cimarex Energy Co (NYSE:XEC). These stocks are Allakos Inc. (NASDAQ:ALLK), Nexstar Media Group, Inc. (NASDAQ:NXST), loanDepot, Inc. (NYSE:LDI), Gildan Activewear Inc (NYSE:GIL), Saia Inc (NASDAQ:SAIA), Leggett & Platt, Inc. (NYSE:LEG), and Brooks Automation, Inc. (NASDAQ:BRKS). This group of stocks’ market caps are similar to XEC’s market cap.

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As you can see these stocks had an average of 19.4 hedge funds with bullish positions and the average amount invested in these stocks was $402 million. That figure was $775 million in XEC’s case. Nexstar Media Group, Inc. (NASDAQ:NXST) is the most popular stock in this table. On the other hand loanDepot, Inc. (NYSE:LDI) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Cimarex Energy Co (NYSE:XEC) is more popular among hedge funds. Our overall hedge fund sentiment score for XEC is 87.2. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 19.3% in 2021 through June 25th but still managed to beat the market by 4.8 percentage points. Hedge funds were also right about betting on XEC as the stock returned 23.5% since the end of March (through 6/25) 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.

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