At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Cabot Oil & Gas Corporation (NYSE:COG) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Cabot Oil & Gas Corporation (NYSE:COG) investors should be aware of a decrease in activity from the world’s largest hedge funds of late. Cabot Oil & Gas Corporation (NYSE:COG) was in 31 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 48. There were 37 hedge funds in our database with COG positions at the end of the first quarter. Our calculations also showed that COG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are dozens of methods market participants have at their disposal to analyze stocks. A pair of the most innovative methods are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the top investment managers can outperform the broader indices by a significant margin (see the details here).
Bruce Kovner of Caxton Associates LP
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s view the new hedge fund action regarding Cabot Oil & Gas Corporation (NYSE:COG).
What does smart money think about Cabot Oil & Gas Corporation (NYSE:COG)?
At second quarter’s end, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in COG over the last 20 quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in Cabot Oil & Gas Corporation (NYSE:COG), which was worth $65.9 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $36.1 million worth of shares. Caxton Associates LP, Lansdowne Partners, and D E Shaw 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 SIR Capital Management allocated the biggest weight to Cabot Oil & Gas Corporation (NYSE:COG), around 2.04% of its 13F portfolio. Caxton Associates LP is also relatively very bullish on the stock, setting aside 1.54 percent of its 13F equity portfolio to COG.
Since Cabot Oil & Gas Corporation (NYSE:COG) has witnessed falling interest from hedge fund managers, logic holds that there exists a select few hedgies who sold off their full holdings by the end of the second quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group said goodbye to the biggest investment of all the hedgies monitored by Insider Monkey, worth an estimated $135.1 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also dumped its stock, about $25.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 6 funds by the end of the second quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Cabot Oil & Gas Corporation (NYSE:COG) but similarly valued. These stocks are Algonquin Power & Utilities Corp. (NYSE:AQN), Watsco Inc (NYSE:WSO), Hubbell Incorporated (NYSE:HUBB), Kilroy Realty Corp (NYSE:KRC), Omega Healthcare Investors Inc (NYSE:OHI), OneConnect Financial Technology Co., Ltd. (NYSE:OCFT), and Newell Brands Inc. (NASDAQ:NWL). All of these stocks’ market caps match COG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AQN | 13 | 283894 | -1 |
| WSO | 21 | 229597 | 1 |
| HUBB | 29 | 335298 | 14 |
| KRC | 20 | 411400 | 0 |
| OHI | 23 | 107776 | 6 |
| OCFT | 5 | 8062 | 2 |
| NWL | 33 | 1244198 | 9 |
| Average | 20.6 | 374318 | 4.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.6 hedge funds with bullish positions and the average amount invested in these stocks was $374 million. That figure was $237 million in COG’s case. Newell Brands Inc. (NASDAQ:NWL) is the most popular stock in this table. On the other hand OneConnect Financial Technology Co., Ltd. (NYSE:OCFT) is the least popular one with only 5 bullish hedge fund positions. Cabot Oil & Gas Corporation (NYSE:COG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for COG is 64.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and beat the market by 17.6 percentage points. Unfortunately COG wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on COG were disappointed as the stock returned 8.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
