Contango Oil & Gas Company (MCF): Hedge Funds Are Bearish and Insiders Are Bullish, What Should You Do?

Contango Oil & Gas Company (NYSEAMEX:MCF) has experienced a decrease in hedge fund sentiment in recent months.

If you’d ask most investors, hedge funds are viewed as slow, old investment tools of yesteryear. While there are greater than 8000 funds with their doors open today, we look at the bigwigs of this group, close to 450 funds. It is estimated that this group has its hands on the lion’s share of all hedge funds’ total asset base, and by watching their highest performing investments, we have revealed a number of investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Equally as important, bullish insider trading activity is another way to parse down the financial markets. Obviously, there are a number of motivations for an executive to sell shares of his or her company, but just one, very clear reason why they would behave bullishly. Many academic studies have demonstrated the useful potential of this strategy if investors know what to do (learn more here).

Now, let’s take a peek at the recent action encompassing Contango Oil & Gas Company (NYSEAMEX:MCF).

What have hedge funds been doing with Contango Oil & Gas Company (NYSEAMEX:MCF)?

At the end of the first quarter, a total of 8 of the hedge funds we track were long in this stock, a change of -20% from the first quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes meaningfully.

Of the funds we track, Ariel Investments, managed by John W. Rogers, holds the largest position in Contango Oil & Gas Company (NYSEAMEX:MCF). Ariel Investments has a $115.3 million position in the stock, comprising 2% of its 13F portfolio. Sitting at the No. 2 spot is PEAK6 Capital Management, managed by Matthew Hulsizer, which held a $6.2 million call position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers with similar optimism include Chuck Royce’s Royce & Associates, Ken Griffin’s Citadel Investment Group and D. E. Shaw’s D E Shaw.

Due to the fact that Contango Oil & Gas Company (NYSEAMEX:MCF) has faced falling interest from the aggregate hedge fund industry, we can see that there exists a select few hedgies that decided to sell off their positions entirely last quarter. It’s worth mentioning that Jim Simons’s Renaissance Technologies dumped the largest investment of the “upper crust” of funds we key on, totaling about $4.2 million in stock.. Joel Greenblatt’s fund, Gotham Asset Management, also dumped its stock, about $2.2 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 2 funds last quarter.

What do corporate executives and insiders think about Contango Oil & Gas Company (NYSEAMEX:MCF)?

Insider purchases made by high-level executives is at its handiest when the primary stock in question has experienced transactions within the past half-year. Over the latest six-month time frame, Contango Oil & Gas Company (NYSEAMEX:MCF) has seen 1 unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Contango Oil & Gas Company (NYSEAMEX:MCF). These stocks are Permian Basin Royalty Trust (NYSE:PBT), Swift Energy Company (NYSE:SFY), Midstates Petroleum Company Inc (NYSE:MPO), TransGlobe Energy Corporation (USA) (NASDAQ:TGA), and Forest Oil Corporation (NYSE:FST). All of these stocks are in the independent oil & gas industry and their market caps are similar to MCF’s market cap.