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Hallador Energy Co (HNRG) Fell Out Of Favor With Hedge Funds

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Abigail Fisher
·6 min read
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We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article, we look at what those funds think of Hallador Energy Co (NASDAQ:HNRG) based on that data.

Is Hallador Energy Co (NASDAQ:HNRG) undervalued? Investors who are in the know were cutting their exposure. The number of long hedge fund positions shrunk by 6 lately. Hallador Energy Co (NASDAQ:HNRG) was in 6 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 12. Our calculations also showed that HNRG isn't among the 30 most popular stocks among hedge funds (click for Q3 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.

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 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

David Harding
David Harding

David Harding of Winton Capital Management

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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Keeping this in mind we're going to take a peek at the fresh hedge fund action regarding Hallador Energy Co (NASDAQ:HNRG).

How have hedgies been trading Hallador Energy Co (NASDAQ:HNRG)?

At third quarter's end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -50% from the second quarter of 2020. On the other hand, there were a total of 10 hedge funds with a bullish position in HNRG a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Hallador Energy Co (NASDAQ:HNRG) was held by Renaissance Technologies, which reported holding $0.7 million worth of stock at the end of September. It was followed by Winton Capital Management with a $0.1 million position. Other investors bullish on the company included Oldfield Partners, Millennium Management, and DC Capital Partners. In terms of the portfolio weights assigned to each position DC Capital Partners allocated the biggest weight to Hallador Energy Co (NASDAQ:HNRG), around 0.37% of its 13F portfolio. Voss Capital is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to HNRG.

Judging by the fact that Hallador Energy Co (NASDAQ:HNRG) has experienced falling interest from the entirety of the hedge funds we track, it's safe to say that there were a few fund managers that slashed their positions entirely by the end of the third quarter. Intriguingly, Roger Ibbotson's Zebra Capital Management dropped the biggest investment of the 750 funds tracked by Insider Monkey, comprising about $0 million in stock, and Donald Sussman's Paloma Partners was right behind this move, as the fund said goodbye to about $0 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 6 funds by the end of the third quarter.

Let's check out hedge fund activity in other stocks similar to Hallador Energy Co (NASDAQ:HNRG). These stocks are U.S. Well Services, Inc. (NASDAQ:USWS), CounterPath Corporation (NASDAQ:CPAH), Taoping Inc. (NASDAQ:TAOP), Acasti Pharma Inc. (NASDAQ:ACST), Image Sensing Systems, Inc. (NASDAQ:ISNS), Coffee Holding Co., Inc. (NASDAQ:JVA), and Tenax Therapeutics Inc (NASDAQ:TENX). This group of stocks' market caps are closest to HNRG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position USWS,6,379,0 CPAH,2,802,1 TAOP,1,325,-1 ACST,1,57,-2 ISNS,1,798,0 JVA,2,2521,0 TENX,4,4787,0 Average,2.4,1381,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 2.4 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $1 million in HNRG's case. U.S. Well Services, Inc. (NASDAQ:USWS) is the most popular stock in this table. On the other hand Taoping Inc. (NASDAQ:TAOP) is the least popular one with only 1 bullish hedge fund positions. Hallador Energy Co (NASDAQ:HNRG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HNRG is 64. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. Hedge funds were also right about betting on HNRG as the stock returned 65.6% since the end of Q3 (through 11/27) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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