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Is WLL A Good Stock To Buy Now?

Debasis Saha
·6 min read

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Whiting Petroleum Corporation (NYSE:WLL) to find out whether there were any major changes in hedge funds' views.

Whiting Petroleum Corporation (NYSE:WLL) has seen an increase in hedge fund interest of late. Whiting Petroleum Corporation (NYSE:WLL) was in 18 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 43. There were 6 hedge funds in our database with WLL holdings at the end of June. Our calculations also showed that WLL 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.

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. 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 66 percentage points since March 2017 (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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Noam Gottesman GLG Partners
Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

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. With all of this in mind we're going to take a glance at the recent hedge fund action regarding Whiting Petroleum Corporation (NYSE:WLL).

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

At Q3's end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 200% from the second quarter of 2020. By comparison, 25 hedge funds held shares or bullish call options in WLL a year ago. With the smart money's capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Is WLL A Good Stock To Buy?
Is WLL A Good Stock To Buy?

Among these funds, SIR Capital Management held the most valuable stake in Whiting Petroleum Corporation (NYSE:WLL), which was worth $32.2 million at the end of the third quarter. On the second spot was Millennium Management which amassed $22.8 million worth of shares. Citadel Investment Group, Glendon Capital Management, and Graham Capital 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 Valueworks LLC allocated the biggest weight to Whiting Petroleum Corporation (NYSE:WLL), around 10.38% of its 13F portfolio. SIR Capital Management is also relatively very bullish on the stock, designating 7.66 percent of its 13F equity portfolio to WLL.

With a general bullishness amongst the heavyweights, specific money managers have jumped into Whiting Petroleum Corporation (NYSE:WLL) headfirst. SIR Capital Management, managed by Vince Maddi and Shawn Brennan, initiated the biggest position in Whiting Petroleum Corporation (NYSE:WLL). SIR Capital Management had $32.2 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $18.6 million position during the quarter. The following funds were also among the new WLL investors: Matthew Barrett's Glendon Capital Management, Kenneth Tropin's Graham Capital Management, and Charles Lemonides's Valueworks LLC.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Whiting Petroleum Corporation (NYSE:WLL) but similarly valued. These stocks are Magnolia Oil & Gas Corporation (NASDAQ:MGY), Core-Mark Holding Company, Inc. (NASDAQ:CORE), Broadmark Realty Capital Inc. (NYSE:BRMK), Mesa Laboratories, Inc. (NASDAQ:MLAB), Nurix Therapeutics, Inc. (NASDAQ:NRIX), Weis Markets, Inc. (NYSE:WMK), and Arbor Realty Trust, Inc. (NYSE:ABR). This group of stocks' market caps are closest to WLL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MGY,19,87213,-1 CORE,20,45034,5 BRMK,11,85821,3 MLAB,8,104292,-6 NRIX,12,249630,12 WMK,15,46048,-4 ABR,11,49249,5 Average,13.7,95327,2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.7 hedge funds with bullish positions and the average amount invested in these stocks was $95 million. That figure was $132 million in WLL's case. Core-Mark Holding Company, Inc. (NASDAQ:CORE) is the most popular stock in this table. On the other hand Mesa Laboratories, Inc. (NASDAQ:MLAB) is the least popular one with only 8 bullish hedge fund positions. Whiting Petroleum Corporation (NYSE:WLL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WLL is 64.2. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on WLL as the stock returned 36.6% since the end of Q3 (through 12/14) 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.

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