Should I Buy EOG Resources Inc (EOG)?

In this article you are going to find out whether hedge funds think EOG Resources Inc (NYSE:EOG) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is EOG Resources Inc (NYSE:EOG) a buy, sell, or hold? The best stock pickers were buying. The number of long hedge fund positions increased by 5 recently. EOG Resources Inc (NYSE:EOG) was in 35 hedge funds’ portfolios at the end of June. The all time high for this statistic is 60. Our calculations also showed that EOG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Michael Gelband of ExodusPoint Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a glance at the latest hedge fund action surrounding EOG Resources Inc (NYSE:EOG).

Do Hedge Funds Think EOG Is A Good Stock To Buy Now?

At second quarter’s end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in EOG over the last 24 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

More specifically, Millennium Management was the largest shareholder of EOG Resources Inc (NYSE:EOG), with a stake worth $96.1 million reported as of the end of June. Trailing Millennium Management was D E Shaw, which amassed a stake valued at $95.5 million. Citadel Investment Group, GLG Partners, and AQR Capital Management 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 Mountain Lake Investment Management allocated the biggest weight to EOG Resources Inc (NYSE:EOG), around 6.72% of its 13F portfolio. Chiron Investment Management is also relatively very bullish on the stock, earmarking 2.09 percent of its 13F equity portfolio to EOG.

As aggregate interest increased, key money managers have jumped into EOG Resources Inc (NYSE:EOG) headfirst. Chiron Investment Management, managed by Ryan Caldwell, created the biggest position in EOG Resources Inc (NYSE:EOG). Chiron Investment Management had $17.3 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $5.9 million investment in the stock during the quarter. The other funds with brand new EOG positions are Donald Sussman’s Paloma Partners, Karim Abbadi and Edward McBride’s Centiva Capital, and Alec Litowitz and Ross Laser’s Magnetar Capital.

Let’s now take a look at hedge fund activity in other stocks similar to EOG Resources Inc (NYSE:EOG). We will take a look at TC Energy Corporation (NYSE:TRP), Align Technology, Inc. (NASDAQ:ALGN), Monster Beverage Corp (NASDAQ:MNST), eBay Inc (NASDAQ:EBAY), Marvell Technology Group Ltd. (NASDAQ:MRVL), Vodafone Group Plc (NASDAQ:VOD), and Veeva Systems Inc (NYSE:VEEV). This group of stocks’ market caps match EOG’s market cap.

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As you can see these stocks had an average of 39.4 hedge funds with bullish positions and the average amount invested in these stocks was $1698 million. That figure was $411 million in EOG’s case. Align Technology, Inc. (NASDAQ:ALGN) is the most popular stock in this table. On the other hand Vodafone Group Plc (NASDAQ:VOD) is the least popular one with only 17 bullish hedge fund positions. EOG Resources Inc (NYSE:EOG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EOG is 50. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. A small number of hedge funds were also right about betting on EOG as the stock returned 10% since the end of the second quarter (through 10/11) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.

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