Should You Avoid Northwest Natural Gas Co (NWN)?

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 Northwest Natural Gas Co (NYSE:NWN).

Is Northwest Natural Gas Co (NYSE:NWN) a safe investment today? It looks like the smart money is selling. During the third quarter, the number of investors from our database bullish on the stock declined by two. 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 Eagle Bancorp, Inc. (NASDAQ:EGBN), Cyberark Software Ltd (NASDAQ:CYBR), and Alliance Resource Partners, L.P. (NASDAQ:ARLP) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Now, let’s go over the new action encompassing Northwest Natural Gas Co (NYSE:NWN).

What does the smart money think about Northwest Natural Gas Co (NYSE:NWN)?

Heading into the fourth quarter of 2016, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, down by 14% from the second quarter of 2016. By comparison, six hedge funds held shares or bullish call options in NWN heading into this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, has the largest position in Northwest Natural Gas Co (NYSE:NWN), worth close to $15 million, corresponding to less than 0.1% of its total 13F portfolio. On Renaissance Technologies’s heels is Fisher Asset Management, led by Ken Fisher, which holds a $14.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism include Cliff Asness’s AQR Capital Management, Israel Englander’s Millennium Management, and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Since Northwest Natural Gas Co (NYSE:NWN) has weathered bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there exists a select few fund managers that decided to sell off their positions entirely by the end of the third quarter. Interestingly, Ken Griffin’s Citadel Investment Group dropped the largest stake of all the investors tracked by Insider Monkey, comprising close to $3.4 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also said goodbye to its call options, about $3 million worth.

Let’s now review hedge fund activity in other stocks similar to Northwest Natural Gas Co (NYSE:NWN). These stocks are Eagle Bancorp, Inc. (NASDAQ:EGBN), Cyberark Software Ltd (NASDAQ:CYBR), Alliance Resource Partners, L.P. (NASDAQ:ARLP), and Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY). This group of stocks’ market caps are similar to NWN’s market cap.

As you can see these stocks had an average of 18 funds with bullish positions and the average amount invested in these stocks was $173 million. That figure was $53 million in NWN’s case. Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) is the most popular stock in this table. On the other hand Alliance Resource Partners, L.P. (NASDAQ:ARLP) is the least popular one with only seven funds holding shares. Northwest Natural Gas Co (NYSE:NWN) 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 Dave & Buster’s Entertainment might be a better candidate to consider taking a long position in.

Disclosure: none