Do Hedge Funds Love Kosmos Energy Ltd (KOS)?

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Kosmos Energy Ltd (NYSE:KOS).

Kosmos Energy Ltd (NYSE:KOS) has seen a decrease in enthusiasm from smart money recently. There were 9 hedge funds in our database with KOS holdings at the end of the previous quarter. 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 Essent Group Ltd (NYSE:ESNT), Valley National Bancorp (NYSE:VLY), and Avon Products, Inc. (NYSE:AVP) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Now, we’re going to take a peek at the key action regarding Kosmos Energy Ltd (NYSE:KOS).

What does the smart money think about Kosmos Energy Ltd (NYSE:KOS)?

At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 22% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in KOS heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Phill Gross and Robert Atchinson’s Adage Capital Management has the biggest position in Kosmos Energy Ltd (NYSE:KOS), worth close to $10.7 million, accounting for less than 0.1% of its total 13F portfolio. Coming in second is D E Shaw, one of the largest hedge funds in the world, holding a $10.4 million position; less than 0.1% of its 13F portfolio is allocated to the company. Other professional money managers that hold long positions encompass Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that said goodbye to their entire stakes in the stock during the third quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management said goodbye to the largest investment of the “upper crust” of funds watched by Insider Monkey, comprising close to $1.6 million in Kosmos Energy Ltd (NYSE:KOS) stock. Glenn Russell Dubin’s fund, Highbridge Capital Management, also said goodbye to its stock, about $0.1 million worth of shares.

Let’s also examine hedge fund activity in other stocks similar to Kosmos Energy Ltd (NYSE:KOS). These stocks are Essent Group Ltd (NYSE:ESNT), Valley National Bancorp (NYSE:VLY), Avon Products, Inc. (NYSE:AVP), and Genworth Financial Inc (NYSE:GNW). This group of stocks’ market values match KOS’s market value.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $193 million. That figure was $34 million in KOS’s case. Avon Products, Inc. (NYSE:AVP) is the most popular stock in this table. On the other hand Valley National Bancorp (NYSE:VLY) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Kosmos Energy Ltd (NYSE:KOS) is even less popular than VLY. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: none.