In this article you are going to find out whether hedge funds think EOG Resources Inc (NYSE:EOG) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
EOG Resources Inc (NYSE:EOG) was in 36 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 60. EOG investors should pay attention to a decrease in activity from the world’s largest hedge funds in recent months. There were 45 hedge funds in our database with EOG positions at the end of the second quarter. Our calculations also showed that EOG 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
David E. Shaw of D.E. Shaw
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 15 best blue chip stocks 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s view the fresh hedge fund action encompassing EOG Resources Inc (NYSE:EOG).
Do Hedge Funds Think EOG Is A Good Stock To Buy Now?
At the end of September, a total of 36 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 EOG 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.
More specifically, Two Sigma Advisors was the largest shareholder of EOG Resources Inc (NYSE:EOG), with a stake worth $133.6 million reported as of the end of September. Trailing Two Sigma Advisors was Lyrical Asset Management, which amassed a stake valued at $98.4 million. Millennium Management, D E Shaw, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Mountain Lake Investment Management allocated the biggest weight to EOG Resources Inc (NYSE:EOG), around 3.61% of its 13F portfolio. SIR Capital Management is also relatively very bullish on the stock, setting aside 2.13 percent of its 13F equity portfolio to EOG.
Seeing as EOG Resources Inc (NYSE:EOG) has faced a decline in interest from hedge fund managers, it’s easy to see that there were a few fund managers that slashed their full holdings in the third quarter. Intriguingly, Steve Cohen’s Point72 Asset Management sold off the largest position of all the hedgies followed by Insider Monkey, worth close to $37.5 million in stock. Brandon Haley’s fund, Holocene Advisors, also cut its stock, about $23.4 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 9 funds in the third quarter.
Let’s now review hedge fund activity in other stocks similar to EOG Resources Inc (NYSE:EOG). We will take a look at DraftKings Inc. (NASDAQ:DKNG), PPL Corporation (NYSE:PPL), State Street Corporation (NYSE:STT), West Pharmaceutical Services Inc. (NYSE:WST), Ecopetrol S.A. (NYSE:EC), Arthur J. Gallagher & Co. (NYSE:AJG), and Alexandria Real Estate Equities Inc (NYSE:ARE). This group of stocks’ market values match EOG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DKNG | 43 | 821536 | -10 |
| PPL | 21 | 216181 | -4 |
| STT | 34 | 493236 | -2 |
| WST | 41 | 375693 | 14 |
| EC | 7 | 87102 | -4 |
| AJG | 35 | 320853 | 6 |
| ARE | 25 | 168133 | 7 |
| Average | 29.4 | 354676 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.4 hedge funds with bullish positions and the average amount invested in these stocks was $355 million. That figure was $619 million in EOG’s case. DraftKings Inc. (NASDAQ:DKNG) is the most popular stock in this table. On the other hand Ecopetrol S.A. (NYSE:EC) is the least popular one with only 7 bullish hedge fund positions. EOG Resources Inc (NYSE:EOG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EOG is 54.3. 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. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on EOG as the stock returned 45.5% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
