A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Lilis Energy, Inc. (NYSE:LLEX).
Hedge fund interest in Lilis Energy, Inc. (NYSE:LLEX) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare LLEX to other stocks including AudioEye, Inc. (NASDAQ:AEYE), ClearOne Incoprorated (NASDAQ:CLRO), and Entera Bio Ltd. (NASDAQ:ENTX) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
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We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to take a peek at the new hedge fund action surrounding Lilis Energy, Inc. (NYSE:LLEX).
How have hedgies been trading Lilis Energy, Inc. (NYSE:LLEX)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. By comparison, 14 hedge funds held shares or bullish call options in LLEX a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Among these funds, Vertex One Asset Management held the most valuable stake in Lilis Energy, Inc. (NYSE:LLEX), which was worth $1.5 million at the end of the third quarter. On the second spot was Encompass Capital Advisors which amassed $1 million worth of shares. Diametric Capital, Springbok Capital, and LMR Partners 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 Vertex One Asset Management allocated the biggest weight to Lilis Energy, Inc. (NYSE:LLEX), around 0.39% of its 13F portfolio. Diametric Capital is also relatively very bullish on the stock, designating 0.14 percent of its 13F equity portfolio to LLEX.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Lilis Energy, Inc. (NYSE:LLEX) but similarly valued. We will take a look at AudioEye, Inc. (NASDAQ:AEYE), ClearOne Incoprorated (NASDAQ:CLRO), Entera Bio Ltd. (NASDAQ:ENTX), and U.S. Global Investors, Inc. (NASDAQ:GROW). This group of stocks’ market caps are closest to LLEX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AEYE | 1 | 123 | -1 |
| CLRO | 1 | 468 | 0 |
| ENTX | 2 | 1665 | 0 |
| GROW | 2 | 2458 | 0 |
| Average | 1.5 | 1179 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.5 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $3 million in LLEX’s case. Entera Bio Ltd. (NASDAQ:ENTX) is the most popular stock in this table. On the other hand AudioEye, Inc. (NASDAQ:AEYE) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Lilis Energy, Inc. (NYSE:LLEX) is more popular among hedge funds. 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. Unfortunately LLEX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LLEX were disappointed as the stock returned -54.5% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.