Hedge Funds Are Selling Carrizo Oil & Gas, Inc. (CRZO)

Is Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) worth your attention right now? Investors who are in the know are taking a bearish view. The number of long hedge fund positions stayed the same which is a slightly negative development in our experience

To most traders, hedge funds are perceived as worthless, outdated financial tools of the past. While there are more than 8000 funds with their doors open at present, we look at the aristocrats of this club, around 450 funds. Most estimates calculate that this group has its hands on the majority of the hedge fund industry’s total capital, and by paying attention to their top investments, we have discovered a few investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 24 percentage points in 7 months (check out a sample of our picks).

Equally as integral, bullish insider trading activity is another way to break down the financial markets. As the old adage goes: there are a number of motivations for a bullish insider to sell shares of his or her company, but just one, very simple reason why they would behave bullishly. Several academic studies have demonstrated the impressive potential of this strategy if investors understand what to do (learn more here).

With all of this in mind, it’s important to take a look at the recent action regarding Carrizo Oil & Gas, Inc. (NASDAQ:CRZO).

How have hedgies been trading Carrizo Oil & Gas, Inc. (NASDAQ:CRZO)?

At the end of the fourth quarter, a total of 8 of the hedge funds we track held long positions in this stock, a change of 0% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes meaningfully.

According to our comprehensive database, Diamond Hill Capital, managed by Ric Dillon, holds the most valuable position in Carrizo Oil & Gas, Inc. (NASDAQ:CRZO). Diamond Hill Capital has a $6 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Millennium Management, managed by Israel Englander, which held a $5.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedgies that are bullish include Abby Flamholz and Yehuda Blinder’s ADAR Investment Management, Gregory Fraser, Rudolph Kluiber, and Timothy Kroch’s GRT Capital Partners and Steven Cohen’s SAC Capital Advisors.

Judging by the fact that Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) has witnessed declining sentiment from the smart money, we can see that there lies a certain “tier” of hedge funds that decided to sell off their entire stakes at the end of the year. Intriguingly, D. E. Shaw’s D E Shaw dumped the largest position of the 450+ funds we watch, totaling close to $4.5 million in stock., and Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital was right behind this move, as the fund cut about $1.4 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

How are insiders trading Carrizo Oil & Gas, Inc. (NASDAQ:CRZO)?

Insider buying is most useful when the company in focus has experienced transactions within the past six months. Over the last half-year time frame, Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) has seen zero unique insiders buying, and 7 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Carrizo Oil & Gas, Inc. (NASDAQ:CRZO). These stocks are LinnCo LLC (NASDAQ:LNCO), QR Energy LP (NYSE:QRE), Diamondback Energy Inc (NASDAQ:FANG), Stone Energy Corporation (NYSE:SGY), and EPL Oil & Gas Inc (NYSE:EPL). This group of stocks belong to the independent oil & gas industry and their market caps resemble CRZO’s market cap.

With the results shown by the aforementioned tactics, retail investors should always keep an eye on hedge fund and insider trading sentiment, and Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) is no exception.

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