Does Matador Resources Company (NYSE:MTDR) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Matador Resources Company (NYSE:MTDR) was in 14 hedge funds’ portfolios at the end of the third quarter of 2019. MTDR has seen an increase in enthusiasm from smart money in recent months. There were 12 hedge funds in our database with MTDR positions at the end of the previous quarter. Our calculations also showed that MTDR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 stocks that are in our short portfolio.
Dmitry Balyasny of Balyasny Asset Managemnet
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the fresh hedge fund action regarding Matador Resources Company (NYSE:MTDR).
What have hedge funds been doing with Matador Resources Company (NYSE:MTDR)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MTDR over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Millennium Management held the most valuable stake in Matador Resources Company (NYSE:MTDR), which was worth $78.4 million at the end of the third quarter. On the second spot was Encompass Capital Advisors which amassed $36.8 million worth of shares. Fisher Asset Management, Citadel Investment Group, and Balyasny Asset 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 Encompass Capital Advisors allocated the biggest weight to Matador Resources Company (NYSE:MTDR), around 2.52% of its 13F portfolio. Centenus Global Management is also relatively very bullish on the stock, setting aside 0.72 percent of its 13F equity portfolio to MTDR.
Consequently, key money managers have jumped into Matador Resources Company (NYSE:MTDR) headfirst. D E Shaw, managed by David E. Shaw, created the most valuable position in Matador Resources Company (NYSE:MTDR). D E Shaw had $6.4 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $2.8 million position during the quarter. The other funds with brand new MTDR positions are Michael Gelband’s ExodusPoint Capital and David Andre and Astro Teller’s Cerebellum Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Matador Resources Company (NYSE:MTDR) but similarly valued. These stocks are Four Corners Property Trust, Inc. (NYSE:FCPT), Fabrinet (NYSE:FN), Carbon Black, Inc. (NASDAQ:CBLK), and Crocs, Inc. (NASDAQ:CROX). This group of stocks’ market caps are similar to MTDR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FCPT | 17 | 120222 | -4 |
| FN | 21 | 175848 | -4 |
| CBLK | 21 | 352066 | 4 |
| CROX | 27 | 417916 | 6 |
| Average | 21.5 | 266513 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $267 million. That figure was $225 million in MTDR’s case. Crocs, Inc. (NASDAQ:CROX) is the most popular stock in this table. On the other hand Four Corners Property Trust, Inc. (NYSE:FCPT) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Matador Resources Company (NYSE:MTDR) is even less popular than FCPT. Hedge funds dodged a bullet by taking a bearish stance towards MTDR. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately MTDR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MTDR investors were disappointed as the stock returned -14.8% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
