In this article we will check out the progression of hedge fund sentiment towards Lonestar Resources US Inc. (NASDAQ:LONE) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Hedge fund interest in Lonestar Resources US Inc. (NASDAQ:LONE) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that LONE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare LONE to other stocks including Xenetic Biosciences, Inc. (NASDAQ:XBIO), Staffing 360 Solutions, Inc. (NASDAQ:STAF), and MoSys Inc. (NASDAQ:MOSY) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Isaac of Arbiter Partners Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s view the recent hedge fund action encompassing Lonestar Resources US Inc. (NASDAQ:LONE).
How have hedgies been trading Lonestar Resources US Inc. (NASDAQ:LONE)?
Heading into the fourth quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 4 hedge funds held shares or bullish call options in LONE a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Ian Cumming and Joseph Steinberg’s Leucadia National has the most valuable position in Lonestar Resources US Inc. (NASDAQ:LONE), worth close to $0.9 million, corresponding to 0.6% of its total 13F portfolio. Coming in second is Renaissance Technologies, holding a $0.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers with similar optimism encompass Ken Griffin’s Citadel Investment Group, Paul J. Isaac’s Arbiter Partners Capital Management and . In terms of the portfolio weights assigned to each position Leucadia National allocated the biggest weight to Lonestar Resources US Inc. (NASDAQ:LONE), around 0.65% of its 13F portfolio. Arbiter Partners Capital Management is also relatively very bullish on the stock, earmarking 0.0012 percent of its 13F equity portfolio to LONE.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Lonestar Resources US Inc. (NASDAQ:LONE) but similarly valued. We will take a look at Xenetic Biosciences, Inc. (NASDAQ:XBIO), Staffing 360 Solutions, Inc. (NASDAQ:STAF), MoSys Inc. (NASDAQ:MOSY), NTN Buzztime Inc (NYSE:NTN), KBS Fashion Group Limited (NASDAQ:KBSF), Naked Brand Group Limited (NASDAQ:NAKD), and Universal Security Instruments, Inc. (NYSE:UUU). This group of stocks’ market values are closest to LONE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| XBIO | 1 | 54 | 0 |
| STAF | 1 | 63 | 0 |
| MOSY | 1 | 132 | 0 |
| NTN | 1 | 167 | 0 |
| KBSF | 1 | 123 | 0 |
| NAKD | 2 | 117 | 0 |
| UUU | 1 | 118 | 0 |
| Average | 1.1 | 111 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.1 hedge funds with bullish positions and the average amount invested in these stocks was $0 million. That figure was $1 million in LONE’s case. Naked Brand Group Limited (NASDAQ:NAKD) is the most popular stock in this table. On the other hand Xenetic Biosciences, Inc. (NASDAQ:XBIO) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Lonestar Resources US Inc. (NASDAQ:LONE) is more popular among hedge funds. Our overall hedge fund sentiment score for LONE is 65.9. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. Unfortunately LONE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LONE were disappointed as the stock returned -80.1% since the end of the third quarter (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
