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Is It Time To Buy Southwestern Energy Company (SWN)?

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard for individual investors to make a proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

Southwestern Energy Company (NYSE:SWN) has seen an increase in activity from the world’s largest hedge funds of late. Southwestern Energy Company was in 38 hedge funds’ portfolios at the end of September. There were 33 hedge funds in our database with Southwestern Energy Company holdings at the end of the previous quarter. At the end of this article we will also compare Southwestern Energy Company to other stocks including Pinnacle Foods Inc (NYSE:PF), Chesapeake Energy Corporation (NYSE:CHK), and RenaissanceRe Holdings Ltd. (NYSE:RNR) to get a better sense of its popularity.

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If you’d ask most traders, hedge funds are viewed as underperforming, old investment vehicles of yesteryear. While there are over 8,000 funds in operation today, our experts hone in on the top tier of this club, about 700 funds. These money managers oversee the majority of all hedge funds’ total capital, and by tracking their finest stock picks, Insider Monkey has unearthed various investment strategies that have historically beaten the broader indices. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Keeping this in mind, let’s take a peek at the new action surrounding Southwestern Energy Company (NYSE:SWN).

How have hedgies been trading Southwestern Energy Company (NYSE:SWN)?

Heading into Q4, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a rise of 15% from the previous quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Israel Englander’s Millennium Management has the number one position in Southwestern Energy Company (NYSE:SWN), worth close to $118.7 million, corresponding to 0.2% of its total 13F portfolio. Coming in second is D E Shaw, which holds a $57.6 million position; 0.1% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions comprise Steve Cohen’s Point72 Asset Management, and John Overdeck and David Siegel’s Two Sigma Advisors.

With general bullishness amongst the heavyweights, some big names were breaking ground themselves. Encompass Capital Advisors, managed by Todd J. Kantor, assembled the most outsized position in Southwestern Energy Company (NYSE:SWN). Encompass Capital Advisors had $22.8 million invested in the company at the end of the quarter. Ron Gutfleish’s Elm Ridge Capital also made an $11.2 million investment in the stock during the quarter. The following funds were also among the new Southwestern Energy Company investors: Lee Munder’s Lee Munder Capital Group, Alec Litowitz and Ross Laser’s Magnetar Capital, and Matthew Tewksbury’s Stevens Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Southwestern Energy Company (NYSE:SWN) but similarly valued. These stocks are Pinnacle Foods Inc (NYSE:PF), Chesapeake Energy Corporation (NYSE:CHK), RenaissanceRe Holdings Ltd. (NYSE:RNR), and National Retail Properties, Inc. (NYSE:NNN). All of these stocks’ market caps are similar to Southwestern Energy Company’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PF 37 1114405 5
CHK 34 1211147 1
RNR 19 344999 -7
NNN 16 197330 -1

As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $717 million. That figure was $569 million in Southwestern Energy Company’s case. Pinnacle Foods Inc (NYSE:PF) is the most popular stock in this table. On the other hand National Retail Properties, Inc. (NYSE:NNN) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Southwestern Energy Company (NYSE:SWN) is more popular among hedge funds, though the capital invested in it is slightly below average. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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