Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees in 2019 amid Powell’s pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the third quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Lonestar Resources US Inc. (NASDAQ:LONE).
Is Lonestar Resources US Inc. (NASDAQ:LONE) a healthy stock for your portfolio? Prominent investors are taking a bearish view. The number of long hedge fund bets fell by 1 lately. Our calculations also showed that LONE 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now let’s review the key hedge fund action encompassing Lonestar Resources US Inc. (NASDAQ:LONE).
What does smart money think about Lonestar Resources US Inc. (NASDAQ:LONE)?
At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LONE over the last 17 quarters. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Leucadia National, managed by Ian Cumming and Joseph Steinberg, holds the biggest position in Lonestar Resources US Inc. (NASDAQ:LONE). Leucadia National has a $10.8 million position in the stock, comprising 1.9% of its 13F portfolio. Coming in second is Renaissance Technologies, holding a $0.9 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism contain Paul J. Isaac’s Arbiter Partners Capital Management, David Harding’s Winton Capital Management and . In terms of the portfolio weights assigned to each position Leucadia National allocated the biggest weight to Lonestar Resources US Inc. (NASDAQ:LONE), around 1.95% of its 13F portfolio. Arbiter Partners Capital Management is also relatively very bullish on the stock, designating 0.06 percent of its 13F equity portfolio to LONE.
Seeing as Lonestar Resources US Inc. (NASDAQ:LONE) has witnessed falling interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of fund managers that elected to cut their entire stakes last quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the biggest investment of all the hedgies watched by Insider Monkey, comprising an estimated $0.2 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $0 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Lonestar Resources US Inc. (NASDAQ:LONE) but similarly valued. We will take a look at Sharps Compliance Corp. (NASDAQ:SMED), Acme United Corporation (NYSE:ACU), 180 Degree Capital Corp. (NASDAQ:TURN), and RF Industries, Ltd. (NASDAQ:RFIL). This group of stocks’ market caps resemble LONE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SMED | 1 | 2013 | 0 |
| ACU | 2 | 6006 | 0 |
| TURN | 2 | 7328 | 0 |
| RFIL | 3 | 6293 | 0 |
| Average | 2 | 5410 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $12 million in LONE’s case. RF Industries, Ltd. (NASDAQ:RFIL) is the most popular stock in this table. On the other hand Sharps Compliance Corp. (NASDAQ:SMED) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Lonestar Resources US Inc. (NASDAQ:LONE) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately LONE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LONE were disappointed as the stock returned -27.2% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
