Is Baytex Energy Corp (USA) (BTE) Worthy of Your Portfolio?

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

Baytex Energy Corp (USA) (NYSE:BTE) investors should pay attention to an increase in hedge fund interest lately. BTE was in 10 hedge funds’ portfolios at the end of the third quarter of 2016. There were 7 hedge funds in our database with BTE 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 SJW Corp. (NYSE:SJW), 51job, Inc. (ADR) (NASDAQ:JOBS), and Argan, Inc. (NYSEAMEX:AGX) to gather more data points.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

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How have hedgies been trading Baytex Energy Corp (USA) (NYSE:BTE)?

At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, up by 43% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BTE over the last 5 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, D E Shaw, one of the biggest hedge funds in the world, holds the most valuable position in Baytex Energy Corp (USA) (NYSE:BTE). D E Shaw has a $9 million position in the stock. On D E Shaw’s heels is Citadel Investment Group, led by Ken Griffin, which holds a $4.9 million position. Some other peers with similar optimism include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, David Costen Haley’s HBK Investments and Cliff Asness’ AQR Capital Management. We should note that none of these hedge funds are 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 industrywide interest jumped, key hedge funds have jumped into Baytex Energy Corp (USA) (NYSE:BTE) headfirst. D E Shaw assembled the biggest position in Baytex Energy Corp (USA) (NYSE:BTE). D E Shaw had $9 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $4.5 million investment in the stock during the quarter. The following funds were also among the new BTE investors: Eric Sprott’s Sprott Asset Management, Alec Litowitz and Ross Laser’s Magnetar Capital, and Ken Griffin’s Citadel Investment Group.

Let’s now take a look at hedge fund activity in other stocks similar to Baytex Energy Corp (USA) (NYSE:BTE). We will take a look at SJW Corp. (NYSE:SJW), 51job, Inc. (ADR) (NASDAQ:JOBS), Argan, Inc. (NYSEAMEX:AGX), and FelCor Lodging Trust Incorporated (NYSE:FCH). This group of stocks’ market values resemble BTE’s market value.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $24 million in BTE’s case. Argan, Inc. (NYSEAMEX:AGX) is the most popular stock in this table. On the other hand 51job, Inc. (ADR) (NASDAQ:JOBS) is the least popular one with only 6 bullish hedge fund positions. Baytex Energy Corp (USA) (NYSE:BTE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AGX might be a better candidate to consider taking a long position in.

Disclosure: None