Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Total Return Index ETFs returned 27.5% through the end of November. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ consensus stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Vista Oil & Gas, S.A.B. de C.V. (NYSE:VIST).
Vista Oil & Gas, S.A.B. de C.V. (NYSE:VIST) investors should be aware of an increase in hedge fund sentiment of late. Our calculations also showed that VIST isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
At the moment there are a multitude of formulas stock market investors employ to appraise stocks. Two of the less known formulas are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the top money managers can outpace the S&P 500 by a significant amount (see the details here).
Seth Klarman of Baupost Group
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a gander at the fresh hedge fund action surrounding Vista Oil & Gas, S.A.B. de C.V. (NYSE:VIST).
Hedge fund activity in Vista Oil & Gas, S.A.B. de C.V. (NYSE:VIST)
At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8 from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in VIST over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Baupost Group held the most valuable stake in Vista Oil & Gas, S.A.B. de C.V. (NYSE:VIST), which was worth $31.9 million at the end of the third quarter. On the second spot was Oaktree Capital Management which amassed $9.7 million worth of shares. Encompass Capital Advisors, Mason Capital Management, and Deep Basin Capital 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 Mason Capital Management allocated the biggest weight to Vista Oil & Gas, S.A.B. de C.V. (NYSE:VIST), around 1.2% of its 13F portfolio. Angelo Gordon & Co is also relatively very bullish on the stock, dishing out 0.55 percent of its 13F equity portfolio to VIST.
As aggregate interest increased, some big names have been driving this bullishness. Baupost Group, managed by Seth Klarman, created the most outsized position in Vista Oil & Gas, S.A.B. de C.V. (NYSE:VIST). Baupost Group had $31.9 million invested in the company at the end of the quarter. Howard Marks’s Oaktree Capital Management also made a $9.7 million investment in the stock during the quarter. The other funds with brand new VIST positions are Todd J. Kantor’s Encompass Capital Advisors, Kenneth Mario Garschina’s Mason Capital Management, and Matt Smith’s Deep Basin Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Vista Oil & Gas, S.A.B. de C.V. (NYSE:VIST) but similarly valued. We will take a look at Haynes International, Inc. (NASDAQ:HAYN), Central Puerto S.A. (NYSE:CEPU), AVROBIO, Inc. (NASDAQ:AVRO), and NACCO Industries, Inc. (NYSE:NC). This group of stocks’ market values are closest to VIST’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HAYN | 15 | 55569 | 5 |
| CEPU | 7 | 10037 | -2 |
| AVRO | 11 | 117439 | 2 |
| NC | 11 | 23595 | 2 |
| Average | 11 | 51660 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $65 million in VIST’s case. Haynes International, Inc. (NASDAQ:HAYN) is the most popular stock in this table. On the other hand Central Puerto S.A. (NYSE:CEPU) is the least popular one with only 7 bullish hedge fund positions. Vista Oil & Gas, S.A.B. de C.V. (NYSE:VIST) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on VIST as the stock returned 10.6% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.