Are Hedge Funds Right to be Bearish on Carrizo Oil & Gas Inc (CRZO)?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Carrizo Oil & Gas Inc (NASDAQ:CRZO).

Is Carrizo Oil & Gas Inc (NASDAQ:CRZO) a buy? Investors who are in the know are becoming less confident. The number of long hedge fund bets went down by 6 recently. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Kosmos Energy Ltd (NYSE:KOS), Cornerstone OnDemand, Inc. (NASDAQ:CSOD), and Dillard’s, Inc. (NYSE:DDS) to gather more data points.

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What does the smart money think about Carrizo Oil & Gas Inc (NASDAQ:CRZO)?

At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 24% drop from the second quarter of 2016, after hedge fund ownership had remained stable for the prior three quarters. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Daruma Asset Management, managed by Mariko Gordon, holds the biggest position in Carrizo Oil & Gas Inc (NASDAQ:CRZO). Daruma Asset Management has a $48.4 million position in the stock, comprising 3% of its 13F portfolio. The second largest stake is held by Citadel Investment Group, led by Ken Griffin, holding a $37.3 million position. Some other hedge funds and institutional investors that are bullish comprise John Overdeck and David Siegel’s Two Sigma Advisors, Vince Maddi and Shawn Brennan’s SIR Capital Management and Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners.

Due to the fact that Carrizo Oil & Gas Inc (NASDAQ:CRZO) has experienced falling interest from the aggregate hedge fund industry, it’s safe to say that there was a specific group of hedge funds that decided to sell off their full holdings last quarter. It’s worth mentioning that John Labanowski’s Brenham Capital Management sold off the biggest stake of the “upper crust” of funds watched by Insider Monkey, totaling about $25.1 million in stock, and Clint Carlson’s Carlson Capital was right behind this move, as the fund said goodbye to about $18.5 million worth of shares. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 6 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to Carrizo Oil & Gas Inc (NASDAQ:CRZO). These stocks are Kosmos Energy Ltd (NYSE:KOS), Cornerstone OnDemand, Inc. (NASDAQ:CSOD), Dillard’s, Inc. (NYSE:DDS), and Stifel Financial Corp. (NYSE:SF). All of these stocks’ market caps match CRZO’s market cap.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $197 million. That figure was $168 million in CRZO’s case. Cornerstone OnDemand, Inc. (NASDAQ:CSOD) is the most popular stock in this table. On the other hand Kosmos Energy Ltd (NYSE:KOS) is the least popular one with only 7 bullish hedge fund positions. Carrizo Oil & Gas Inc (NASDAQ:CRZO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CSOD might be a better candidate to consider a long position.

Disclosure: None