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Hedge Funds Are Piling Into Oasis Petroleum Inc. (OAS)

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In this article we will analyze whether Oasis Petroleum Inc. (NASDAQ:OAS) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is Oasis Petroleum Inc. (NASDAQ:OAS) the right investment to pursue these days? The smart money was taking a bullish view. The number of bullish hedge fund positions advanced by 6 in recent months. Oasis Petroleum Inc. (NASDAQ:OAS) was in 23 hedge funds' portfolios at the end of June. The all time high for this statistic is 38. Our calculations also showed that OAS isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Andy Redleaf Andrew Redleaf Whitebox Advisors
Andy Redleaf Andrew Redleaf Whitebox Advisors

Andy Redleaf of Whitebox Advisors

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 EV 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. Keeping this in mind we're going to take a peek at the key hedge fund action regarding Oasis Petroleum Inc. (NASDAQ:OAS).

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

At second quarter's end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 35% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards OAS over the last 24 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

More specifically, Aristeia Capital was the largest shareholder of Oasis Petroleum Inc. (NASDAQ:OAS), with a stake worth $62.8 million reported as of the end of June. Trailing Aristeia Capital was Lonestar Capital Management, which amassed a stake valued at $33.6 million. Whitebox Advisors, Adage Capital Management, and Courage 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 Courage Capital allocated the biggest weight to Oasis Petroleum Inc. (NASDAQ:OAS), around 7.35% of its 13F portfolio. Lonestar Capital Management is also relatively very bullish on the stock, designating 4.93 percent of its 13F equity portfolio to OAS.

Now, key money managers were leading the bulls' herd. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the most valuable position in Oasis Petroleum Inc. (NASDAQ:OAS). Adage Capital Management had $15.4 million invested in the company at the end of the quarter. Ken Heebner's Capital Growth Management also initiated a $11.1 million position during the quarter. The following funds were also among the new OAS investors: Matthew Hulsizer's PEAK6 Capital Management, D. E. Shaw's D E Shaw, and Renaissance Technologies.

Let's also examine hedge fund activity in other stocks similar to Oasis Petroleum Inc. (NASDAQ:OAS). We will take a look at Seer, Inc. (NASDAQ:SEER), Xencor Inc (NASDAQ:XNCR), Hyliion Holdings Corp. (NYSE:HYLN), World Fuel Services Corporation (NYSE:INT), EnPro Industries, Inc. (NYSE:NPO), Columbia Property Trust Inc (NYSE:CXP), and Goldman Sachs BDC, Inc. (NYSE:GSBD). This group of stocks' market valuations match OAS's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SEER,16,271960,4 XNCR,17,208197,1 HYLN,5,13364,-7 INT,14,83173,-1 NPO,12,234187,-5 CXP,18,139285,6 GSBD,7,13801,2 Average,12.7,137710,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.7 hedge funds with bullish positions and the average amount invested in these stocks was $138 million. That figure was $210 million in OAS's case. Columbia Property Trust Inc (NYSE:CXP) is the most popular stock in this table. On the other hand Hyliion Holdings Corp. (NYSE:HYLN) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Oasis Petroleum Inc. (NASDAQ:OAS) is more popular among hedge funds. Our overall hedge fund sentiment score for OAS is 78.2. 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 24% in 2021 through October 22nd but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on OAS as the stock returned 15.4% since the end of June (through 10/22) 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.