U.S. Markets closed

Here’s What Hedge Funds Think About Carrizo Oil & Gas, Inc. (CRZO)

Nina Todic

The financial regulations require hedge funds and wealthy investors that crossed the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on June 28th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) based on those filings.

Is Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) going to take off soon? The best stock pickers are becoming less hopeful. The number of long hedge fund bets were cut by 5 in recent months. Our calculations also showed that CRZO isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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 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 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 our short portfolio.

Didric Cederholm Lion Point Capital

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to check out the latest hedge fund action surrounding Carrizo Oil & Gas, Inc. (NASDAQ:CRZO).

What does smart money think about Carrizo Oil & Gas, Inc. (NASDAQ:CRZO)?

At the end of the second quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in CRZO a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with CRZO Positions

Of the funds tracked by Insider Monkey, Lion Point, managed by Didric Cederholm, holds the biggest position in Carrizo Oil & Gas, Inc. (NASDAQ:CRZO). Lion Point has a $46.8 million position in the stock, comprising 4.6% of its 13F portfolio. The second most bullish fund manager is Matt Smith of Deep Basin Capital, with a $18.6 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions encompass Noam Gottesman's GLG Partners, Ken Fisher's Fisher Asset Management and Ken Griffin's Citadel Investment Group.

Because Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) has experienced falling interest from hedge fund managers, we can see that there exists a select few hedge funds that slashed their full holdings last quarter. Intriguingly, Renaissance Technologies sold off the biggest position of the "upper crust" of funds monitored by Insider Monkey, worth an estimated $7.8 million in stock, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund dropped about $6.8 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 5 funds last quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) but similarly valued. These stocks are JinkoSolar Holding Co., Ltd. (NYSE:JKS), BJ's Restaurants, Inc. (NASDAQ:BJRI), Associated Capital Group, Inc. (NYSE:AC), and Stoneridge, Inc. (NYSE:SRI). This group of stocks' market caps are closest to CRZO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JKS,8,18193,2 BJRI,14,124883,-5 AC,6,66735,-1 SRI,15,88433,-5 Average,10.75,74561,-2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $82 million in CRZO's case. Stoneridge, Inc. (NYSE:SRI) is the most popular stock in this table. On the other hand Associated Capital Group, Inc. (NYSE:AC) is the least popular one with only 6 bullish hedge fund positions. Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CRZO wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CRZO investors were disappointed as the stock returned -14.3% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.

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

Related Content