The financial regulations require hedge funds and wealthy investors that crossed the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on June 28th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Cabot Oil & Gas Corporation (NYSE:COG) based on those filings.
Is Cabot Oil & Gas Corporation (NYSE:COG) undervalued? The smart money is becoming more confident. The number of bullish hedge fund bets improved by 5 recently. Our calculations also showed that COG isn’t among the 30 most popular stocks among hedge funds (view the video below)..
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the fresh hedge fund action encompassing Cabot Oil & Gas Corporation (NYSE:COG).
How are hedge funds trading Cabot Oil & Gas Corporation (NYSE:COG)?
At the end of the second quarter, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in COG over the last 16 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Cabot Oil & Gas Corporation (NYSE:COG) was held by Stelliam Investment Management, which reported holding $258.9 million worth of stock at the end of March. It was followed by Two Sigma Advisors with a $124.7 million position. Other investors bullish on the company included Millennium Management, Luminus Management, and Deep Basin Capital.
As aggregate interest increased, specific money managers have jumped into Cabot Oil & Gas Corporation (NYSE:COG) headfirst. Renaissance Technologies, created the largest position in Cabot Oil & Gas Corporation (NYSE:COG). Renaissance Technologies had $31.5 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $7.8 million investment in the stock during the quarter. The other funds with brand new COG positions are Joel Greenblatt’s Gotham Asset Management, Sara Nainzadeh’s Centenus Global Management, and Matthew Tewksbury’s Stevens Capital Management.
Let’s go over hedge fund activity in other stocks similar to Cabot Oil & Gas Corporation (NYSE:COG). These stocks are Brown & Brown, Inc. (NYSE:BRO), EPAM Systems Inc (NYSE:EPAM), WestRock Company (NYSE:WRK), and 58.com Inc (NYSE:WUBA). All of these stocks’ market caps are similar to COG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BRO | 21 | 759675 | 4 |
| EPAM | 23 | 261441 | 2 |
| WRK | 26 | 428562 | 3 |
| WUBA | 22 | 434944 | -2 |
| Average | 23 | 471156 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $471 million. That figure was $932 million in COG’s case. WestRock Company (NYSE:WRK) is the most popular stock in this table. On the other hand Brown & Brown, Inc. (NYSE:BRO) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Cabot Oil & Gas Corporation (NYSE:COG) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately COG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on COG were disappointed as the stock returned -23.1% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
