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Were Hedge Funds Right About Oasis Petroleum Inc. (OAS)?

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As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Oasis Petroleum Inc. (NASDAQ:OAS).

Is Oasis Petroleum Inc. (NASDAQ:OAS) undervalued? Hedge funds were in an optimistic mood. The number of bullish hedge fund bets advanced by 3 lately. Oasis Petroleum Inc. (NASDAQ:OAS) was in 17 hedge funds' portfolios at the end of March. The all time high for this statistic is 38. Our calculations also showed that OAS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 14 hedge funds in our database with OAS positions at the end of the fourth quarter.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Andy Redleaf Andrew Redleaf Whitebox Advisors
Andy Redleaf Andrew Redleaf Whitebox Advisors

Andy Redleaf of Whitebox Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. With all of this in mind let's take a look at the recent hedge fund action regarding Oasis Petroleum Inc. (NASDAQ:OAS).

Do Hedge Funds Think OAS Is A Good Stock To Buy Now?

At the end of March, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 21% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in OAS a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Aristeia Capital was the largest shareholder of Oasis Petroleum Inc. (NASDAQ:OAS), with a stake worth $48.2 million reported as of the end of March. Trailing Aristeia Capital was Whitebox Advisors, which amassed a stake valued at $32.1 million. Lonestar Capital Management, Courage Capital, and Millennium 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 Courage Capital allocated the biggest weight to Oasis Petroleum Inc. (NASDAQ:OAS), around 17.7% of its 13F portfolio. Lonestar Capital Management is also relatively very bullish on the stock, earmarking 5.46 percent of its 13F equity portfolio to OAS.

With a general bullishness amongst the heavyweights, key money managers were leading the bulls' herd. Intrinsic Edge Capital, managed by Mark Coe, initiated the biggest position in Oasis Petroleum Inc. (NASDAQ:OAS). Intrinsic Edge Capital had $6.8 million invested in the company at the end of the quarter. Noam Gottesman's GLG Partners also made a $1.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital), Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.

Let's go over hedge fund activity in other stocks similar to Oasis Petroleum Inc. (NASDAQ:OAS). These stocks are Orion Engineered Carbons SA (NYSE:OEC), Fortuna Silver Mines Inc. (NYSE:FSM), Bolt Biotherapeutics, Inc. (NASDAQ:BOLT), National Research Corporation (NASDAQ:NRC), Opera Limited (NASDAQ:OPRA), Apollo Medical Holdings, Inc. (NASDAQ:AMEH), and WideOpenWest, Inc. (NYSE:WOW). This group of stocks' market caps are closest to OAS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OEC,19,186263,0 FSM,12,19878,1 BOLT,23,423044,23 NRC,9,31401,-3 OPRA,5,7933,2 AMEH,7,16922,1 WOW,14,178652,1 Average,12.7,123442,3.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.7 hedge funds with bullish positions and the average amount invested in these stocks was $123 million. That figure was $174 million in OAS's case. Bolt Biotherapeutics, Inc. (NASDAQ:BOLT) is the most popular stock in this table. On the other hand Opera Limited (NASDAQ:OPRA) is the least popular one with only 5 bullish hedge fund positions. Oasis Petroleum Inc. (NASDAQ:OAS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OAS is 54.8. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Hedge funds were also right about betting on OAS as the stock returned 59.1% since the end of Q1 (through 7/23) 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.