This Metric Says You Are Smart to Buy Carrizo Oil & Gas, Inc. (CRZO)

Is it smart to be bullish on Carrizo Oil & Gas, Inc. (NASDAQ:CRZO)?

If you were to ask many traders, hedge funds are seen as overrated, old investment tools of an era lost to time. Although there are more than 8,000 hedge funds with their doors open currently, this site focuses on the aristocrats of this club, around 525 funds. Analysts calculate that this group has its hands on the majority of the smart money’s total assets, and by tracking their best stock picks, we’ve revealed a number of investment strategies that have historically outperformed the broader indices. 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 began to sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 33 percentage points in 11 months (see all of our picks from August).

Equally as useful, positive insider trading activity is a second way to look at the stock market universe. Obviously, there are many stimuli for a corporate insider to get rid of shares of his or her company, but only one, very clear reason why they would buy. Various empirical studies have demonstrated the impressive potential of this method if investors know what to do (learn more here).

Thus, it’s important to study the recent info surrounding Carrizo Oil & Gas, Inc. (NASDAQ:CRZO).

How are hedge funds trading Carrizo Oil & Gas, Inc. (NASDAQ:CRZO)?

In preparation for the third quarter, a total of 11 of the hedge funds we track were long in this stock, a change of 38% from the first quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially.

When using filings from the hedgies we track, Daruma Asset Management, managed by Mariko Gordon, holds the largest position in Carrizo Oil & Gas, Inc. (NASDAQ:CRZO). Daruma Asset Management has a $50.6 million position in the stock, comprising 2.5% of its 13F portfolio. The second largest stake is held by Israel Englander of Millennium Management, with a $27.2 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds that are bullish include Ken Griffin’s Citadel Investment Group, Ric Dillon’s Diamond Hill Capital and Matthew Hulsizer’s PEAK6 Capital Management.

Now, certain bigger names were leading the bulls’ herd. Daruma Asset Management, managed by Mariko Gordon, established the largest position in Carrizo Oil & Gas, Inc. (NASDAQ:CRZO). Daruma Asset Management had 50.6 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $27.2 million investment in the stock during the quarter. The other funds with brand new CRZO positions are Ken Griffin’s Citadel Investment Group, Ric Dillon’s Diamond Hill Capital, and Matthew Hulsizer’s PEAK6 Capital Management.

How are insiders trading Carrizo Oil & Gas, Inc. (NASDAQ:CRZO)?

Insider buying is at its handiest when the company in question has experienced transactions within the past half-year. Over the latest half-year time frame, Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll check out the relationship between both of these indicators in other stocks similar to Carrizo Oil & Gas, Inc. (NASDAQ:CRZO). These stocks are LinnCo LLC (NASDAQ:LNCO), QR Energy LP (NYSE:QRE), Diamondback Energy Inc (NASDAQ:FANG), Stone Energy Corporation (NYSE:SGY), and EPL Oil & Gas Inc (NYSE:EPL). This group of stocks are in the independent oil & gas industry and their market caps are closest to CRZO’s market cap.

Using the returns explained by the previously mentioned research, regular investors should always pay attention to hedge fund and insider trading activity, and Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) shareholders fit into this picture quite nicely.

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