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Hedge Funds Have Never Been Less Bullish On Panhandle Oil and Gas Inc. (PHX)

Nina Todic

Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by more than 8 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Panhandle Oil and Gas Inc. (NYSE:PHX).

Panhandle Oil and Gas Inc. (NYSE:PHX) has seen a decrease in activity from the world's largest hedge funds lately. Our calculations also showed that PHX isn't among the 30 most popular stocks among hedge funds.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_189632" align="aligncenter" width="450"] David Harding of Winton Capital Management[/caption]

David Harding

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a gander at the latest hedge fund action regarding Panhandle Oil and Gas Inc. (NYSE:PHX).

What does smart money think about Panhandle Oil and Gas Inc. (NYSE:PHX)?

At Q3's end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards PHX over the last 17 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

No of Hedge Funds with PHX Positions

More specifically, Trigran Investments was the largest shareholder of Panhandle Oil and Gas Inc. (NYSE:PHX), with a stake worth $33.5 million reported as of the end of September. Trailing Trigran Investments was Sprott Asset Management, which amassed a stake valued at $0.6 million. Winton Capital Management was 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 Trigran Investments allocated the biggest weight to Panhandle Oil and Gas Inc. (NYSE:PHX), around 6.33% of its portfolio. Sprott Asset Management is also relatively very bullish on the stock, dishing out 0.14 percent of its 13F equity portfolio to PHX.

Since Panhandle Oil and Gas Inc. (NYSE:PHX) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there is a sect of hedge funds that elected to cut their positions entirely last quarter. It's worth mentioning that Paul Hondros's AlphaOne Capital Partners dumped the biggest investment of the 750 funds watched by Insider Monkey, totaling close to $0.5 million in stock. Chuck Royce's fund, Royce & Associates, also dropped its stock, about $0.1 million worth. These transactions are interesting, as total hedge fund interest fell by 1 funds last quarter.

Let's now take a look at hedge fund activity in other stocks similar to Panhandle Oil and Gas Inc. (NYSE:PHX). These stocks are L.B. Foster Company (NASDAQ:FSTR), Celsius Holdings, Inc. (NASDAQ:CELH), Century Casinos, Inc. (NASDAQ:CNTY), and The Habit Restaurants Inc (NASDAQ:HABT). This group of stocks' market values resemble PHX's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FSTR,11,52504,-4 CELH,5,820,3 CNTY,13,51313,3 HABT,13,38775,1 Average,10.5,35853,0.75 [/table]

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 $36 million. That figure was $34 million in PHX's case. Century Casinos, Inc. (NASDAQ:CNTY) is the most popular stock in this table. On the other hand Celsius Holdings, Inc. (NASDAQ:CELH) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Panhandle Oil and Gas Inc. (NYSE:PHX) is even less popular than CELH. Hedge funds dodged a bullet by taking a bearish stance towards PHX. Our calculations showed that the top 20 most popular hedge fund stocks returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately PHX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); PHX investors were disappointed as the stock returned -9.6% during the fourth quarter (through 11/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.

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

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