“BP has offered US$8 a share for Penn Virginia, which drills for oil in Texas and elsewhere in the US, and has a market capitalisation of about US$319.2mln, according to people familiar with the matter. Penn is understood to have rejected the offer because it believes the terms offered undervalue the company, and is holding out for at least US$10 a share. It is believed rivals to BP such as Exxon Mobil Corp and Chevron may also be interested in buying the company.”
Penn Virginia Corporation was in 26 hedge funds’ portfolio at the end of the first quarter of 2015. This is an extremely large number for a $300 million market-cap stock. PVA has also experienced a slight increase in support from the world’s most elite money managers in recent months. There were 25 hedge funds in our database with PVA positions at the end of the previous quarter.
We pay attention to hedge funds’ moves because our research have shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. however, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular stock picks in real time since the end of August 2012. These stocks returned 145% since then and outperformed the S&P 500 Index by 85 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
With all of this in mind, let’s go over the recent action regarding Penn Virginia Corporation (NYSE:PVA).
Hedge fund activity in Penn Virginia Corporation (NYSE:PVA)
Heading into Q2, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. According to our database, George Soros’ Soros Fund Management had the largest position in Penn Virginia Corporation (NYSE:PVA), worth close to $38.9 million, corresponding to 0.4% of its total 13F portfolio. The second largest stake is held by Brett Hendrickson of Nokomis Capital, with a $27.9 million position; 8.3% of its 13F portfolio is allocated to the company. Other hedgies with similar optimism comprise Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners, Stephen V. Raneri’s LionEye Capital Management and Steve Cohen’s Point72 Asset Management.
Now, key hedge funds were leading the bulls’ herd. Lone Star Value Management, managed by Jeffrey E. Eberwein, assembled the most outsized position in Penn Virginia Corporation (NYSE:PVA). Lone Star Value Management had 7.8 million invested in the company at the end of the quarter. John Labanowski’s Brenham Capital Management also initiated a $5.8 million position during the quarter. The other funds with new positions in the stock are Jerome Debs’s Bodri Capital Management, Jim Chanos’s Kynikos, and Kyle Bass’s Hayman Advisors.
Overall, Penn Virginia’s hedge fund sentiment indicator is extremely bullish. The stock is a buy here.