U.S. Markets open in 5 mins

Is Bonanza Creek Energy (BCEI) A Good Stock To Buy According To Hedge Funds?

Nina Todic

Is Bonanza Creek Energy Inc (NYSE:BCEI) a bargain? Prominent investors are getting more optimistic. The number of long hedge fund positions increased by 2 recently. Our calculations also showed that bcei 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Howard Marks OAKTREE CAPITAL MANAGEMENT

We're going to take a look at the recent hedge fund action encompassing Bonanza Creek Energy Inc (NYSE:BCEI).

What does smart money think about Bonanza Creek Energy Inc (NYSE:BCEI)?

Heading into the second quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in BCEI a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

No of Hedge Funds with BCEI Positions

More specifically, Mangrove Partners was the largest shareholder of Bonanza Creek Energy Inc (NYSE:BCEI), with a stake worth $45.9 million reported as of the end of March. Trailing Mangrove Partners was Oaktree Capital Management, which amassed a stake valued at $38.6 million. PAR Capital Management, Millennium Management, and Brigade Capital were also very fond of the stock, giving the stock large weights in their portfolios.

With a general bullishness amongst the heavyweights, some big names have jumped into Bonanza Creek Energy Inc (NYSE:BCEI) headfirst. Intrepid Capital Management, managed by Mark Travis, created the biggest position in Bonanza Creek Energy Inc (NYSE:BCEI). Intrepid Capital Management had $2 million invested in the company at the end of the quarter. Brett Hendrickson's Nokomis Capital also made a $1.8 million investment in the stock during the quarter. The following funds were also among the new BCEI investors: Benjamin A. Smith's Laurion Capital Management, Mike Vranos's Ellington, and Steve Cohen's Point72 Asset Management.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Bonanza Creek Energy Inc (NYSE:BCEI) but similarly valued. These stocks are CURO Group Holdings Corp. (NYSE:CURO), HighPoint Resources Corporation (NYSE:HPR), Hometrust Bancshares Inc (NASDAQ:HTBI), and Gilat Satellite Networks Ltd. (NASDAQ:GILT). All of these stocks' market caps are similar to BCEI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CURO,17,85677,7 HPR,14,59728,0 HTBI,12,66553,3 GILT,2,25518,0 Average,11.25,59369,2.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $159 million in BCEI's case. CURO Group Holdings Corp. (NYSE:CURO) is the most popular stock in this table. On the other hand Gilat Satellite Networks Ltd. (NASDAQ:GILT) is the least popular one with only 2 bullish hedge fund positions. Bonanza Creek Energy Inc (NYSE:BCEI) 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately BCEI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BCEI were disappointed as the stock returned -20.7% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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

Related Content