It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Laredo Petroleum Inc (NYSE:LPI).
Laredo Petroleum Inc (NYSE:LPI) investors should be aware of an increase in hedge fund interest in recent months. LPI was in 22 hedge funds’ portfolios at the end of the third quarter of 2016. There were 21 hedge funds in our database with LPI holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as InterOil Corporation (USA) (NYSE:IOC), Eastgroup Properties Inc (NYSE:EGP), and Radian Group Inc (NYSE:RDN) to gather more data points.
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How have hedgies been trading Laredo Petroleum Inc (NYSE:LPI)?
At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 5% uptick from one quarter earlier, as smart money ownership pushes even further into yearly highs. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John H. Scully’s SPO Advisory Corp has the most valuable position in Laredo Petroleum Inc (NYSE:LPI), worth close to $217.6 million, accounting for 3.8% of its total 13F portfolio. On SPO Advisory Corp’s heels is Water Street Capital, managed by Gilchrist Berg, which holds a $70.1 million position; the fund has 2.7% of its 13F portfolio invested in the stock. Other peers that are bullish consist of Dmitry Balyasny’s Balyasny Asset Management, Israel Englander’s Millennium Management and Steve Cohen’s Point72 Asset Management. We should note that SPO Advisory Corp is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As one would reasonably expect, some big names have jumped into Laredo Petroleum Inc (NYSE:LPI) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the largest position in Laredo Petroleum Inc (NYSE:LPI). Balyasny Asset Management had $51 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $22.2 million position during the quarter. The following funds were also among the new LPI investors: Benjamin A. Smith’s Laurion Capital Management, Todd J. Kantor’s Encompass Capital Advisors, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Laredo Petroleum Inc (NYSE:LPI). We will take a look at InterOil Corporation (USA) (NYSE:IOC), Eastgroup Properties Inc (NYSE:EGP), Radian Group Inc (NYSE:RDN), and Coherent, Inc. (NASDAQ:COHR). This group of stocks’ market values are closest to LPI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IOC | 20 | 274150 | -2 |
| EGP | 8 | 12198 | 2 |
| RDN | 28 | 378635 | -3 |
| COHR | 23 | 174462 | 1 |
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $210 million. That figure was $461 million in LPI’s case. Radian Group Inc (NYSE:RDN) is the most popular stock in this table. On the other hand Eastgroup Properties Inc (NYSE:EGP) is the least popular one with only 8 bullish hedge fund positions. Laredo Petroleum Inc (NYSE:LPI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard RDN might be a better candidate to consider a long position.
