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With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Kosmos Energy Ltd (NYSE:KOS).
Is KOS a good stock to buy now? Prominent investors were becoming less hopeful. The number of long hedge fund bets were cut by 1 in recent months. Kosmos Energy Ltd (NYSE:KOS) was in 11 hedge funds' portfolios at the end of September. The all time high for this statistics is 30. Our calculations also showed that KOS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Joel Greenblatt of Gotham Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now let's take a peek at the key hedge fund action surrounding Kosmos Energy Ltd (NYSE:KOS).
Do Hedge Funds Think KOS Is A Good Stock To Buy Now?
At third quarter's end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards KOS over the last 21 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Two Sigma Advisors held the most valuable stake in Kosmos Energy Ltd (NYSE:KOS), which was worth $3.5 million at the end of the third quarter. On the second spot was Winton Capital Management which amassed $1.2 million worth of shares. Kettle Hill Capital Management, Millennium Management, and Gotham Asset Management 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 Kettle Hill Capital Management allocated the biggest weight to Kosmos Energy Ltd (NYSE:KOS), around 0.26% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to KOS.
Due to the fact that Kosmos Energy Ltd (NYSE:KOS) has experienced a decline in interest from the aggregate hedge fund industry, it's safe to say that there exists a select few fund managers that elected to cut their full holdings in the third quarter. Intriguingly, Phill Gross and Robert Atchinson's Adage Capital Management said goodbye to the largest stake of the 750 funds tracked by Insider Monkey, valued at about $1 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund dropped about $0.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds in the third quarter.
Let's now review hedge fund activity in other stocks similar to Kosmos Energy Ltd (NYSE:KOS). We will take a look at Tristate Capital Holdings Inc (NASDAQ:TSC), SeaSpine Holdings Corp (NASDAQ:SPNE), Haverty Furniture Companies, Inc. (NYSE:HVT), Bank of Marin Bancorp (NASDAQ:BMRC), HCI Group Inc (NYSE:HCI), Kaleido BioSciences, Inc. (NASDAQ:KLDO), and Newtek Business Services Corp (NASDAQ:NEWT). All of these stocks' market caps match KOS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TSC,17,36134,0 SPNE,16,51405,0 HVT,14,52327,3 BMRC,7,9987,-1 HCI,10,32195,-1 KLDO,2,8819,-5 NEWT,4,7684,-2 Average,10,28364,-0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $8 million in KOS's case. Tristate Capital Holdings Inc (NASDAQ:TSC) is the most popular stock in this table. On the other hand Kaleido BioSciences, Inc. (NASDAQ:KLDO) is the least popular one with only 2 bullish hedge fund positions. Kosmos Energy Ltd (NYSE:KOS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KOS is 45. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on KOS as the stock returned 121.4% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.