Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Midstates Petroleum Company, Inc. (NYSE:MPO).
Is Midstates Petroleum Company, Inc. (NYSE:MPO) a buy right now? The smart money is getting less optimistic. The number of bullish hedge fund bets went down by 1 in recent months. Our calculations also showed that mpo isn’t among the 30 most popular stocks among hedge funds. MPO was in 18 hedge funds’ portfolios at the end of the first quarter of 2019. There were 19 hedge funds in our database with MPO holdings at the end of the previous quarter.
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a peek at the recent hedge fund action encompassing Midstates Petroleum Company, Inc. (NYSE:MPO).
How are hedge funds trading Midstates Petroleum Company, Inc. (NYSE:MPO)?
At Q1’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in MPO over the last 15 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Fir Tree was the largest shareholder of Midstates Petroleum Company, Inc. (NYSE:MPO), with a stake worth $45.8 million reported as of the end of March. Trailing Fir Tree was Avenue Capital, which amassed a stake valued at $25 million. Renaissance Technologies, Sound Point Capital, and Ancora Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Midstates Petroleum Company, Inc. (NYSE:MPO) has witnessed a decline in interest from the smart money, logic holds that there exists a select few fund managers who sold off their entire stakes in the third quarter. It’s worth mentioning that Himanshu Gulati’s Antara Capital sold off the largest position of all the hedgies monitored by Insider Monkey, comprising about $2.6 million in stock. Phil Frohlich’s fund, Prescott Group Capital Management, also dumped its stock, about $0.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 1 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Midstates Petroleum Company, Inc. (NYSE:MPO). We will take a look at Red Lion Hotels Corporation (NYSE:RLH), NII Holdings, Inc. (NASDAQ:NIHD), Catasys, Inc. (NASDAQ:CATS), and ASA Gold and Precious Metals Limited (NYSE:ASA). This group of stocks’ market caps match MPO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RLH | 11 | 58120 | -1 |
| NIHD | 14 | 40636 | -4 |
| CATS | 6 | 2276 | 5 |
| ASA | 5 | 13600 | 0 |
| Average | 9 | 28658 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $98 million in MPO’s case. NII Holdings, Inc. (NASDAQ:NIHD) is the most popular stock in this table. On the other hand ASA Gold and Precious Metals Limited (NYSE:ASA) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Midstates Petroleum Company, Inc. (NYSE:MPO) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately MPO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MPO were disappointed as the stock returned -29.9% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
