In this article we are going to use hedge fund sentiment as a tool and determine whether PHX Minerals Inc. (NYSE:PHX) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
PHX Minerals Inc. (NYSE:PHX) investors should be aware of a decrease in hedge fund interest in recent months. PHX Minerals Inc. (NYSE:PHX) was in 6 hedge funds’ portfolios at the end of September. The all time high for this statistics is 11. There were 11 hedge funds in our database with PHX holdings at the end of June. Our calculations also showed that PHX isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to analyze the new hedge fund action encompassing PHX Minerals Inc.(NYSE:PHX).
How have hedgies been trading PHX Minerals Inc. (NYSE:PHX)?
At third quarter’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -45% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PHX over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Trigran Investments was the largest shareholder of PHX Minerals Inc. (NYSE:PHX), with a stake worth $3.4 million reported as of the end of September. Trailing Trigran Investments was Renaissance Technologies, which amassed a stake valued at $0.2 million. Two Sigma Advisors, Millennium Management, and Winton Capital 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 Trigran Investments allocated the biggest weight to PHX Minerals Inc. (NYSE:PHX), around 0.61% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, earmarking 0.0018 percent of its 13F equity portfolio to PHX.
Since PHX Minerals Inc. (NYSE:PHX) has witnessed a decline in interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of funds who sold off their entire stakes in the third quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the biggest stake of the 750 funds tracked by Insider Monkey, valued at an estimated $0.2 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund said goodbye to about $0.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 5 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to PHX Minerals Inc. (NYSE:PHX). These stocks are Dare Bioscience, Inc. (NASDAQ:DARE), Condor Hospitality Trust, Inc. (NYSE:CDOR), Motus GI Holdings, Inc. (NASDAQ:MOTS), GigaMedia Limited (NASDAQ:GIGM), CBL & Associates Properties, Inc. (NYSE:CBL), Fujian Blue Hat Interactive Entertainment Technology Ltd. (NASDAQ:BHAT), and Millendo Therapeutics, Inc. (NASDAQ:MLND). This group of stocks’ market valuations are closest to PHX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DARE | 1 | 703 | 0 |
| CDOR | 3 | 1170 | 0 |
| MOTS | 8 | 7507 | 1 |
| GIGM | 1 | 92 | 0 |
| CBL | 7 | 2193 | -11 |
| BHAT | 3 | 580 | 2 |
| MLND | 9 | 6272 | 1 |
| Average | 4.6 | 2645 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.6 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $4 million in PHX’s case. Millendo Therapeutics, Inc. (NASDAQ:MLND) is the most popular stock in this table. On the other hand Dare Bioscience, Inc. (NASDAQ:DARE) is the least popular one with only 1 bullish hedge fund positions. PHX Minerals Inc. (NYSE:PHX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PHX is 47.6. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. Hedge funds were also right about betting on PHX as the stock returned 28% since the end of Q3 (through 11/27) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
