This Metric Says You Are Smart to Buy Bonanza Creek Energy Inc (BCEI)

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Bonanza Creek Energy Inc (NYSE:BCEI) shareholders have witnessed an increase in enthusiasm from smart money of late.

Bonanza Creek Energy Inc (NYSE:BCEI)

According to most market participants, hedge funds are perceived as slow, outdated investment vehicles of yesteryear. While there are more than 8000 funds with their doors open at present, we at Insider Monkey choose to focus on the top tier of this club, close to 450 funds. It is estimated that this group oversees most of all hedge funds’ total asset base, and by tracking their top picks, we have figured out a few investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 23.3 percentage points in 8 months (see the details here).

Just as important, bullish insider trading sentiment is another way to break down the stock market universe. As the old adage goes: there are lots of reasons for a corporate insider to drop shares of his or her company, but just one, very obvious reason why they would buy. Many empirical studies have demonstrated the market-beating potential of this method if piggybackers understand what to do (learn more here).

With these “truths” under our belt, it’s important to take a glance at the latest action encompassing Bonanza Creek Energy Inc (NYSE:BCEI).

What have hedge funds been doing with Bonanza Creek Energy Inc (NYSE:BCEI)?

In preparation for this quarter, a total of 16 of the hedge funds we track were long in this stock, a change of 78% from the first quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes meaningfully.

Of the funds we track, Cardinal Capital, managed by Amy Minella, holds the biggest position in Bonanza Creek Energy Inc (NYSE:BCEI). Cardinal Capital has a $24.5 million position in the stock, comprising 1.5% of its 13F portfolio. Sitting at the No. 2 spot is West Face Capital, managed by Greg Boland, which held a $22.4 million position; the fund has 4.1% of its 13F portfolio invested in the stock. Remaining hedgies with similar optimism include Ken Griffin’s Citadel Investment Group, Steven Cohen’s SAC Capital Advisors and Donald Chiboucis’s Columbus Circle Investors.

With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Cupps Capital Management, managed by Drew Cupps, assembled the most outsized position in Bonanza Creek Energy Inc (NYSE:BCEI). Cupps Capital Management had 8.4 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $4.3 million position during the quarter. The other funds with brand new BCEI positions are Neil Chriss’s Hutchin Hill Capital, Paul Tudor Jones’s Tudor Investment Corp, and D. E. Shaw’s D E Shaw.

How are insiders trading Bonanza Creek Energy Inc (NYSE:BCEI)?

Insider buying is at its handiest when the company we’re looking at has seen transactions within the past six months. Over the last half-year time period, Bonanza Creek Energy Inc (NYSE:BCEI) has experienced zero unique insiders buying, and 2 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Bonanza Creek Energy Inc (NYSE:BCEI). These stocks are Crosstex Energy, L.P. (NASDAQ:XTEX), PDC Energy Inc (NASDAQ:PDCE), Enbridge Energy Management, L.L.C. (NYSE:EEQ), Gran Tierra Energy Inc. (NYSEAMEX:GTE), and EXCO Resources Inc (NYSE:XCO). All of these stocks are in the independent oil & gas industry and their market caps match BCEI’s market cap.

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