The Most Popular Penny Stocks in the Energy Sector Among Elite Hedge Funds

The slump in oil prices put a great deal of pressure on a large number of players in the energy market, pushing the stock price of many of them to multi-year lows. The shale boom that preceded the decline in crude prices prompted many energy companies to rack up huge debts in order to keep up with the competition and expand their operations. Instead, these companies found it difficult to create attractive cash flows for investors given low commodity prices. As investors sought refuge, these companies’ stocks got crushed, falling below $1.00 per share. Some of these penny stocks can still be found in the portfolios of top hedge funds and in this article we’ll take a look at the five of them that are the most popular.

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While there are many metrics that investors can assess in the investment process, hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor beat the S&P 500 by around 95 basis points per month (see more details here).

#5 Triangle Petroleum Corporation (NYSEMKT:TPLM)

 – Investors with long positions (as of March 31): 8

 – Aggregate value of investors’ holdings (as of March 31): $1.09 million

Starting our top 5 is Triangle Petroleum Corporation (NYSEMKT:TPLM), a holding company that engages in oil exploration and production through a number of subsidiaries. Eight elite hedge funds in our database had this stock in their equity portfolios at the end of March, down from 12 registered three months earlier. Jim Simons‘ Renaissance Technologies dumped 21% of its stake in Triangle Petroleum Corporation (NYSEMKT:TPLM) but remains the largest shareholder among the eight funds long the stock, with 649,474 shares valued at $352,000. In April, the stock was downgraded by analysts at Johnson Rice to ‘Hold’ from the previous rating of ‘Buy’. Wells Fargo also reiterated its ‘Hold’ rating on the stock, which corresponds to the consensus among analysts. The consensus price target for Triangle Petroleum Corporation (NYSEMKT:TPLM) is $2.71 per share, which implies a rather robust premium of 1,255%, given yesterday’s closing price of $0.20 per share.

#4 Key Energy Services, Inc. (NYSE:KEG)

 – Investors with long positions (as of March 31): 8

 – Aggregate value of investors’ holdings (as of March 31): $9.81 million

Next up is Key Energy Services, Inc. (NYSE:KEG), a rig-based well servicing contractor. At the end of the first quarter, the stock was held by eight of the funds followed by Insider Monkey, down from 11 a quarter prior. Mark Rachesky‘s MHR Fund Management holds 17.5 million shares of Key Energy Services, valued at $6.46 million on March 31, according to its latest 13F filing. At the end of April, Key Energy Services, Inc. (NYSE:KEG) announced that the US Justice Department would not be prosecuting the company for alleged foreign corruption involving its Mexico unit. The company also said it was in talks with the Securities and Exchange Commission to settle the agency’s probe in the same matter and is expecting a conclusion by the end of the second quarter. For the first quarter of 2016, Key Energy Services, Inc. (NYSE:KEG) reported a 58% decline in revenue to $111 million and an adjusted loss of $0.41 per share. Shares currently trade at just $0.28 and are down by 86% over the last year.

On the next page we take a look at three more popular energy stocks that are trading below $1.00.