Hedge Funds Have Mixed Feelings On These Two Energy Stocks

Charles Davidson and Wexford Capital continue to dump shares of Diamondback Energy Inc (NASDAQ:FANG), slashing their position to just 171,803 shares from the 844,133 shares reported in the fund’s latest 13F filing. The latest move saw the disposal of 328,814 shares in three transactions at prices varying between $67.15 and $70.92 apiece. As a result, Wexford’s stake in Diamondback Energy has fallen below 1% of the company’s common stock. In a separate Form 4 filing with the Securities and Exchange Commission, J. Carlo Cannell has signaled his bullishness on North American Energy Partners Inc. (USA) (NYSE:NOA), having acquired 13,100 shares of the mining company at an average price of $1.99 per unit. Following this transaction, Cannell Capital is now deemed to own roughly 3.65 million shares of North American Energy Partners, which account for 10.8% of its outstanding shares.

Having previously worked for Goldman Sachs and Steinhardt Partners, Charles Davidson founded Wexford Capital in 1994 and is currently serving as Chairman and Chief Investment Officer. 20 years later, Wexford has grown into a behemoth with more than $5 billion in assets under management, with more than 60% of those assets residing in hedge funds. Davidson has a well-diversified equity portfolio, with roughly one-third of his funds invested in energy stocks and the rest spread across a number of sectors. During the second quarter he made some notable changes to Wexford’s portfolio, with Energy Transfer Partners LP (NYSE:ETP) making its way into the top five holdings of the fund. Davidson built a position that amasses 368.814 shares and has a current market value of $16.5 million. He also boosted his investment in Famous Dave’s of America, Inc. (NASDAQ:DAVE) to 1.33 million shares, while his stake in EnLink Midstream Partners LP (NYSE:ENLK) was left unchanged, with Wexford holding some 1.92 million shares of the provider of midstream energy services.

At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning 118% and beating the market by more than 60 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.

The second quarter of 2015 was a difficult one for Diamondback Energy Inc (NASDAQ:FANG), with revenues declining by 6.25% year-over-year to $119 million. Meanwhile, net profit turned negative as the company posted a loss of $3.45 per share due to unusual expenses. For the current quarter, analysts expect the company to post revenues of $129 million and earnings of $0.33 per share. Diamondback Energy’s stock is up by 16% for the year, although the price has been declining since hitting a high of $85.82 per share in April. Billionaire Ken Griffin also has a sizable stake in the company, but chose to trim it by 7% during the second quarter. As a result, Citadel Investment Group reported ownership of 1.56 million shares in its latest 13F filing. Israel Englander also reduced his exposure, dumping roughly one-quarter of his position and leaving his fund, Millennium Management, with 1.37 million shares at the end of the second quarter.

A former employee of Dakin Securities, an investment bank in San Francisco, California, J. Carlo Cannell founded Cannell Capital in 1992 with $600,000 in capital. An avid supporter of value investing, Cannell uses bottom-up and quantitative analysis to identify investment opportunities in small-cap stocks. During the second quarter, Cannell dumped approximately 40% of his stake in Callon Petroleum Company (NYSE:CPE), reducing it to just 1.2 million shares. He also decided to step up his interest in Avid Technology, Inc. (NASDAQ:AVID), more than doubling his stake to 806,234 shares. Cannell Capital’s top equity position, GTT Communications Inc (NYSE:GTT) was reduced for the fifth quarter in a row, with the fund reporting ownership of 1.74 million shares in its latest 13F filing.

So far this year, North American Energy Partners Inc. (USA) (NYSE:NOA)’s stock has slumped by 33.8% to a current value of $2.05 per share, giving the company a market cap of $68.2 million. Second quarter revenues came in at $64.41 million, with the loss widening to $0.13 per share, compared with the loss of $0.11 for the same period of last year. Analysts are upbeat about the prospects of North American Energy Partners and expect a profit in the current quarter, eyeing revenues of $101 million and earnings of $0.02 per share. Only five of the hedge funds that we track were invested in North American Energy Partners Inc. (USA) (NYSE:NOA) on June 30, with hedge fund guru Jim Simons among them. His fund, Renaissance Technologies, held 389,637 shares, down by 10% during the second quarter. The biggest stake in North American Energy Partners within our database is held by Frontfour Capital Group, run by Stephen Loukas, David A. Lorber and Zachary George, which reported ownership of 3.61 million shares.

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