At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is Jagged Peak Energy Inc. (NYSE:JAG) the right investment to pursue these days? Money managers are reducing their bets on the stock. The number of long hedge fund bets went down by 5 recently. 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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a look at the key hedge fund action encompassing Jagged Peak Energy Inc. (NYSE:JAG).
What does the smart money think about Jagged Peak Energy Inc. (NYSE:JAG)?
At Q4's end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in JAG over the last 14 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Deep Basin Capital was the largest shareholder of Jagged Peak Energy Inc. (NYSE:JAG), with a stake worth $30.1 million reported as of the end of September. Trailing Deep Basin Capital was Citadel Investment Group, which amassed a stake valued at $18.9 million. Encompass Capital Advisors, Adage Capital Management, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Jagged Peak Energy Inc. (NYSE:JAG) has faced falling interest from hedge fund managers, logic holds that there exists a select few hedge funds who sold off their positions entirely in the third quarter. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace LLP dumped the largest investment of all the hedgies watched by Insider Monkey, valued at about $13.9 million in stock. Mike Vranos's fund, Ellington, also said goodbye to its stock, about $0.9 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 5 funds in the third quarter.
Let's now review hedge fund activity in other stocks similar to Jagged Peak Energy Inc. (NYSE:JAG). We will take a look at Lexington Realty Trust (NYSE:LXP), Altair Engineering Inc. (NASDAQ:ALTR), SeaWorld Entertainment Inc (NYSE:SEAS), and Acadia Realty Trust (NYSE:AKR). This group of stocks' market values are similar to JAG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LXP,16,41352,3 ALTR,14,62260,1 SEAS,29,650882,7 AKR,11,113181,2 Average,17.5,216919,3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $217 million. That figure was $84 million in JAG's case. SeaWorld Entertainment Inc (NYSE:SEAS) is the most popular stock in this table. On the other hand Acadia Realty Trust (NYSE:AKR) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Jagged Peak Energy Inc. (NYSE:JAG) is even less popular than AKR. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on JAG, though not to the same extent, as the stock returned 22.9% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.