Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Battalion Oil Corporation (NYSE:BATL).
Is Battalion Oil Corporation (NYSE:BATL) a good investment now? The best stock pickers were in a bearish mood. The number of long hedge fund bets dropped by 1 lately. Battalion Oil Corporation (NYSE:BATL) was in 4 hedge funds’ portfolios at the end of September. The all time high for this statistics is 5. Our calculations also showed that BATL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are tons of methods investors can use to grade their holdings. Two of the less utilized methods are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the elite investment managers can trounce the market by a superb amount (see the details here).
Didric Cederholm of Lion Point Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to take a look at the recent hedge fund action surrounding Battalion Oil Corporation (NYSE:BATL).
What have hedge funds been doing with Battalion Oil Corporation (NYSE:BATL)?
At the end of September, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BATL over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Jonathan Barrett and Paul Segal’s Luminus Management has the most valuable position in Battalion Oil Corporation (NYSE:BATL), worth close to $48.6 million, comprising 11.2% of its total 13F portfolio. The second most bullish fund manager is Oaktree Capital Management, managed by Howard Marks, which holds a $23.8 million position; 0.5% of its 13F portfolio is allocated to the company. Other peers that are bullish encompass Didric Cederholm’s Lion Point, Paul J. Isaac’s Arbiter Partners Capital Management and . In terms of the portfolio weights assigned to each position Luminus Management allocated the biggest weight to Battalion Oil Corporation (NYSE:BATL), around 11.23% of its 13F portfolio. Lion Point is also relatively very bullish on the stock, designating 2.49 percent of its 13F equity portfolio to BATL.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified BATL as a viable investment and initiated a position in the stock.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Battalion Oil Corporation (NYSE:BATL) but similarly valued. We will take a look at Riot Blockchain, Inc (NASDAQ:RIOT), Points International Ltd (NASDAQ:PCOM), Entravision Communications Corporation (NYSE:EVC), StoneCastle Financial Corp (NASDAQ:BANX), DarioHealth Corp. (NASDAQ:DRIO), Spark Networks SE (NYSE:LOV), and Graham Corporation (NYSE:GHM). This group of stocks’ market caps are closest to BATL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RIOT | 4 | 1053 | 1 |
| PCOM | 7 | 20124 | -2 |
| EVC | 9 | 15700 | -1 |
| BANX | 1 | 252 | 0 |
| DRIO | 3 | 10982 | 1 |
| LOV | 6 | 29375 | 1 |
| GHM | 9 | 19016 | 1 |
| Average | 5.6 | 13786 | 0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.6 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $84 million in BATL’s case. Entravision Communications Corporation (NYSE:EVC) is the most popular stock in this table. On the other hand StoneCastle Financial Corp (NASDAQ:BANX) is the least popular one with only 1 bullish hedge fund positions. Battalion Oil Corporation (NYSE:BATL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BATL is 46.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately BATL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BATL investors were disappointed as the stock returned 1% since the end of September (through 11/27) 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 most of these stocks already outperformed the market in 2020.
Follow Battalion Oil Corp (NYSE:BATL)
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Disclosure: None. This article was originally published at Insider Monkey.
