Northern Oil & Gas, Inc. (NOG): Hedge Funds and Insiders Are Bearish, What Should You Do?

Is Northern Oil & Gas, Inc. (NYSEAMEX:NOG) a great investment now? Money managers are getting less optimistic. The number of bullish hedge fund bets were cut by 3 recently.

According to most shareholders, hedge funds are assumed to be worthless, outdated investment tools of years past. While there are more than 8000 funds in operation today, we choose to focus on the crème de la crème of this group, close to 450 funds. Most estimates calculate that this group has its hands on most of the hedge fund industry’s total capital, and by tracking their best stock picks, we have determined a few investment strategies that have historically outpaced the market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 24 percentage points in 7 months (see the details here).

Equally as integral, positive insider trading sentiment is a second way to parse down the world of equities. As the old adage goes: there are a number of reasons for a bullish insider to cut shares of his or her company, but only one, very simple reason why they would buy. Plenty of academic studies have demonstrated the impressive potential of this tactic if investors understand what to do (learn more here).

With these “truths” under our belt, let’s take a glance at the latest action encompassing Northern Oil & Gas, Inc. (NYSEAMEX:NOG).

How have hedgies been trading Northern Oil & Gas, Inc. (NYSEAMEX:NOG)?

At the end of the fourth quarter, a total of 7 of the hedge funds we track were bullish in this stock, a change of -30% from the previous quarter. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully.

Of the funds we track, Citadel Investment Group, managed by Ken Griffin, holds the most valuable position in Northern Oil & Gas, Inc. (NYSEAMEX:NOG). Citadel Investment Group has a $6.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Millennium Management, managed by Israel Englander, which held a $3.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedgies that hold long positions include Dmitry Balyasny’s Balyasny Asset Management, Russell Lucas’s Lucas Capital Management and William Leland Edwards’s Palo Alto Investors.

Seeing as Northern Oil & Gas, Inc. (NYSEAMEX:NOG) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of money managers that elected to cut their positions entirely last quarter. Interestingly, SAC Subsidiary’s Sigma Capital Management said goodbye to the biggest position of the “upper crust” of funds we monitor, comprising close to $0.9 million in stock., and John Overdeck and David Siegel of Two Sigma Advisors was right behind this move, as the fund said goodbye to about $0.5 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 3 funds last quarter.

How have insiders been trading Northern Oil & Gas, Inc. (NYSEAMEX:NOG)?

Insider trading activity, especially when it’s bullish, is particularly usable when the company in focus has seen transactions within the past 180 days. Over the latest 180-day time period, Northern Oil & Gas, Inc. (NYSEAMEX:NOG) has experienced zero unique insiders buying, and 1 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Northern Oil & Gas, Inc. (NYSEAMEX:NOG). These stocks are W&T Offshore, Inc. (NYSE:WTI), Bill Barrett Corporation (NYSE:BBG), Approach Resources Inc. (NASDAQ:AREX), Pioneer Southwest Energy Partners L.P. (NYSE:PSE), and Rex Energy Corporation (NASDAQ:REXX). This group of stocks belong to the oil & gas drilling & exploration industry and their market caps match NOG’s market cap.