Is Kosmos Energy Ltd (KOS) Going to Burn These Hedge Funds?

Is Kosmos Energy Ltd (NYSE:KOS) worth your attention right now? Investors who are in the know are betting on the stock. The number of long hedge fund positions moved up by 5 lately.

In the eyes of most traders, hedge funds are assumed to be underperforming, old financial vehicles of yesteryear. While there are over 8000 funds in operation today, we at Insider Monkey choose to focus on the aristocrats of this club, close to 450 funds. It is widely believed that this group has its hands on most of the hedge fund industry’s total capital, and by paying attention to their top picks, we have revealed a number of investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Equally as beneficial, positive insider trading activity is a second way to parse down the investments you’re interested in. There are many stimuli for an executive to drop shares of his or her company, but only one, very simple reason why they would buy. Many academic studies have demonstrated the market-beating potential of this strategy if shareholders know where to look (learn more here).

Now, it’s important to take a look at the recent action encompassing Kosmos Energy Ltd (NYSE:KOS).

How have hedgies been trading Kosmos Energy Ltd (NYSE:KOS)?

At Q1’s end, a total of 13 of the hedge funds we track were bullish in this stock, a change of 63% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully.

When looking at the hedgies we track, Ken Griffin’s Citadel Investment Group had the most valuable position in Kosmos Energy Ltd (NYSE:KOS), worth close to $37.3 million, comprising 0.1% of its total 13F portfolio. On Citadel Investment Group’s heels is Clint Carlson of Carlson Capital, with a $27.7 million position; 0.4% of its 13F portfolio is allocated to the company. Other hedge funds with similar optimism include Alec Litowitz and Ross Laser’s Magnetar Capital, Israel Englander’s Millennium Management and Steven Cohen’s SAC Capital Advisors.

As industrywide interest jumped, key money managers were leading the bulls’ herd. Carlson Capital, managed by Clint Carlson, initiated the most outsized position in Kosmos Energy Ltd (NYSE:KOS). Carlson Capital had 27.7 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser’s Magnetar Capital also initiated a $17.9 million position during the quarter. The following funds were also among the new KOS investors: Dmitry Balyasny’s Balyasny Asset Management, Brian Taylor’s Pine River Capital Management, and Neil Chriss’s Hutchin Hill Capital.

How have insiders been trading Kosmos Energy Ltd (NYSE:KOS)?

Bullish insider trading is at its handiest when the primary stock in question has experienced transactions within the past six months. Over the last six-month time frame, Kosmos Energy Ltd (NYSE:KOS) has seen 1 unique insiders purchasing, and 10 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Kosmos Energy Ltd (NYSE:KOS). These stocks are Oasis Petroleum Inc. (NYSE:OAS), Baytex Energy Corp (USA) (NYSE:BTE), Energen Corporation (NYSE:EGN), National Fuel Gas Co. (NYSE:NFG), and SM Energy Co. (NYSE:SM). This group of stocks are the members of the independent oil & gas industry and their market caps are closest to KOS’s market cap.

With the results exhibited by the aforementioned strategies, everyday investors must always pay attention to hedge fund and insider trading sentiment, and Kosmos Energy Ltd (NYSE:KOS) shareholders fit into this picture quite nicely.

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