Is Noble Energy, Inc. (NBL) A Good Stock To Buy?

There are several ways to beat the market, and investing in smaller cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Noble Energy, Inc. (NYSE:NBL) which is in the mid cap space.

Noble Energy, Inc. (NYSE:NBL) has seen a very large increase in enthusiasm from smart money recently. NBL was in 46 hedge funds’ portfolios at the end of the first quarter of 2016. There were 32 hedge funds in our database with NBL positions at the end of 2015. This is a very bullish sigh though 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 Verisk Analytics, Inc. (NASDAQ:VRSK), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), and CGI Group Inc. (USA) (NYSE:GIB) to gather more data points.

Oil prices almost doubled since the lows of first quarter and this has provided a significant boost to the shares of energy companies. Noble Energy, Inc. shares are also up about 40%  since January 19th. This week Nomura analyst Lloyd Byrne reiterated his buy rating and increased his price target from $36 to $41. Here is what he said:

“Noble Energy is an E&P worth spending time on. It has strong management, tier 1 / big company assets,and attractive valuation. While many energy specific investors are supportive, most generalists we speak to are reticentin the face of Israeli regulatory uncertainty. This past Wednesday Israel’s Energy Minister Yuval Steinitz announced anew “stability” deal with respect to changes in the country’s taxes, export quotas and regulations for hydrocarbon development. On Sunday, Israel’s cabinet voted to approve the revised proposal. This was expected. In March, thetiming of the Leviathan project was potentially disrupted when Israel’s Supreme Court blocked a 10-year proposal forstability that was on the table. The Supreme Court gave the government one-year to revise its plan. This is what occurred this past week. The revised stability provision will likely be challenged to the Supreme Court of Israel, despite new language providing “the state more leeway” to alter terms in the future. Given that this is the remaining disputed provision in the proposed regulatory framework for hydrocarbon development, the parties are hoping for a Court ruling inshort order, if needed. There is some precedence for an “expedited case”.”

Keeping this in mind, we’re going to take a peek at the new hedge fund action encompassing Noble Energy, Inc. (NYSE:NBL).

How are hedge funds trading Noble Energy, Inc. (NYSE:NBL)?

At the end of the first quarter, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of 44% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Eagle Capital Management, managed by Boykin Curry, holds the largest position in Noble Energy, Inc. (NYSE:NBL). Eagle Capital Management has a $463.8 million position in the stock, comprising 1.9% of its 13F portfolio. Coming in second is Phill Gross and Robert Atchinson of Adage Capital Management, with a $331.1 million position; 0.9% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism consist of Israel Englander’s Millennium Management, Clint Carlson’s Carlson Capital and Dmitry Balyasny’s Balyasny Asset Management.

Now, key hedge funds have been driving this bullishness. Kingdon Capital, managed by Mark Kingdon, created the largest position in Noble Energy, Inc. (NYSE:NBL). Kingdon Capital had $43.4 million invested in the company at the end of the quarter. Kenneth Tropin’s Graham Capital Management also made a $14.8 million investment in the stock during the quarter. The following funds were also among the new NBL investors: Marc Lisker, Glenn Fuhrman and John Phelan’s MSDC Management, Jim Simons’s Renaissance Technologies, and Charles Clough’s Clough Capital Partners.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Noble Energy, Inc. (NYSE:NBL) but similarly valued. These stocks are Verisk Analytics, Inc. (NASDAQ:VRSK), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), CGI Group Inc. (USA) (NYSE:GIB), and Motorola Solutions Inc (NYSE:MSI). All of these stocks’ market caps match NBL’s market cap.

As you can see these stocks had an average of 28.5 hedge funds with bullish positions and the average amount invested in these stocks was $1.1 billion. That figure was $1.74 billion in NBL’s case. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is the most popular stock in this table. On the other hand CGI Group Inc. (USA) (NYSE:GIB) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Noble Energy, Inc. (NYSE:NBL) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.