Should You Avoid Northern Oil & Gas, Inc. (NOG)?

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the government. The 13F filings show the funds’ and investors’ portfolio positions as of September 30. In this article, we look at what those funds think of Northern Oil & Gas, Inc. (NYSEMKT:NOG) based on that data.

Northern Oil & Gas, Inc. (NYSEMKT:NOG) was in 8 hedge funds’ portfolios at the end of the third quarter of 2015. NOG has seen a decrease in support from the world’s most elite money managers of late. There were 12 hedge funds in our database with NOG holdings at the end of the previous quarter. 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 Synutra International, Inc. (NASDAQ:SYUT), Lion Biotechnologies Inc (NASDAQ:LBIO), and Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH) to gather more data points.

If you’d ask most investors, hedge funds are assumed to be unimportant, outdated financial vehicles of the past. While there are over 8000 funds with their doors open at present, We choose to focus on the elite of this club, around 700 funds. It is estimated that this group of investors orchestrate the lion’s share of the smart money’s total asset base, and by following their matchless equity investments, Insider Monkey has identified many investment strategies that have historically outstripped the broader indices. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Now, we’re going to go over the fresh action encompassing Northern Oil & Gas, Inc. (NYSEMKT:NOG).

What have hedge funds been doing with Northern Oil & Gas, Inc. (NYSEAMEX:NOG)?

Heading into Q4, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from the previous quarter. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Fine Capital Partners, managed by Debra Fine, holds the number one position in Northern Oil & Gas, Inc. (NYSEAMEX:NOG). Fine Capital Partners has an $26.8 million position in the stock, comprising 2.6% of its 13F portfolio. Sitting at the No. 2 spot is Pine River Capital Management, managed by Brian Taylor, which holds an $6.8 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism contain Brett Hendrickson’s Nokomis Capital, Ken Griffin’s Citadel Investment Group and Israel Englander’s Millennium Management.

Because Northern Oil & Gas, Inc. (NYSEAMEX:NOG) has faced a bearish sentiment from the entirety of the hedge funds we track, logic holds that there exists a select few hedge funds who were dropping their entire stakes last quarter. At the top of the heap, Mason Hawkins’s Southeastern Asset Management dropped the largest stake of the 700 funds followed by Insider Monkey, comprising an estimated $5.9 million in stock, and Mark Travis’s Intrepid Capital Management was right behind this move, as the fund said goodbye to about $5.8 million worth of shares. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 4 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Northern Oil & Gas, Inc. (NYSEMKT:NOG). These stocks are Synutra International, Inc. (NASDAQ:SYUT), Lion Biotechnologies Inc (NASDAQ:LBIO), Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH), and The York Water Company (NASDAQ:YORW). This group of stocks’ market values are closest to NOG’s market value.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $36 million in NOG’s case. Lion Biotechnologies Inc (NASDAQ:LBIO) is the most popular stock in this table and Synutra International, Inc. (NASDAQ:SYUT) is the least popular one with only 5 bullish hedge fund positions. Northern Oil & Gas, Inc. (NYSEMKT:NOG) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LBIO might be a better candidate to consider a long position.