Is Jagged Peak Energy Inc. (NYSE:JAG) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Jagged Peak Energy Inc. (NYSE:JAG) investors should be aware of an increase in hedge fund sentiment in recent months. Our calculations also showed that JAG isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? 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.
Let's go over the recent hedge fund action surrounding Jagged Peak Energy Inc. (NYSE:JAG).
How are hedge funds trading Jagged Peak Energy Inc. (NYSE:JAG)?
At Q1's end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards JAG over the last 15 quarters. With the smart money's capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in Jagged Peak Energy Inc. (NYSE:JAG) was held by Deep Basin Capital, which reported holding $51.6 million worth of stock at the end of March. It was followed by Encompass Capital Advisors with a $40.6 million position. Other investors bullish on the company included Adage Capital Management, Citadel Investment Group, and Point72 Asset Management.
Consequently, specific money managers were breaking ground themselves. Luminus Management, managed by Jonathan Barrett and Paul Segal, assembled the most valuable position in Jagged Peak Energy Inc. (NYSE:JAG). Luminus Management had $1.6 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also made a $0.6 million investment in the stock during the quarter. The only other fund with a brand new JAG position is John Overdeck and David Siegel's Two Sigma Advisors.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Jagged Peak Energy Inc. (NYSE:JAG) but similarly valued. We will take a look at Wingstop Inc (NASDAQ:WING), 360 Finance, Inc. (NASDAQ:QFIN), Sally Beauty Holdings, Inc. (NYSE:SBH), and Arena Pharmaceuticals, Inc. (NASDAQ:ARNA). This group of stocks' market caps match JAG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WING,24,246752,3 QFIN,1,548,-1 SBH,19,175672,-3 ARNA,22,383836,-3 Average,16.5,201702,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $202 million. That figure was $133 million in JAG's case. Wingstop Inc (NASDAQ:WING) is the most popular stock in this table. On the other hand 360 Finance, Inc. (NASDAQ:QFIN) is the least popular one with only 1 bullish hedge fund positions. Jagged Peak Energy Inc. (NYSE:JAG) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately JAG wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); JAG investors were disappointed as the stock returned -22.4% during the same time 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.