Brooge Energy Limited (BROG): Hedge Funds Getting Bullish

In this article we will take a look at whether hedge funds think Brooge Energy Limited (NASDAQ:BROG) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Brooge Energy Limited (NASDAQ:BROG) has experienced an increase in support from the world’s most elite money managers of late. Our calculations also showed that BROG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Michael Platt Bluecrest Capital Management

Michael Platt of BlueCrest Capital Mgmt.

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the key hedge fund action surrounding Brooge Energy Limited (NASDAQ:BROG).

What have hedge funds been doing with Brooge Energy Limited (NASDAQ:BROG)?

At the end of the first quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 133% from the previous quarter. By comparison, 10 hedge funds held shares or bullish call options in BROG 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 publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Alec Litowitz and Ross Laser’s Magnetar Capital has the number one position in Brooge Energy Limited (NASDAQ:BROG), worth close to $24.5 million, accounting for 0.6% of its total 13F portfolio. Coming in second is Michael Platt and William Reeves of BlueCrest Capital Mgmt., with a $10.3 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Some other peers with similar optimism encompass Michael Platt and William Reeves’s BlueCrest Capital Mgmt., Israel Englander’s Millennium Management and Ari Zweiman’s 683 Capital Partners. In terms of the portfolio weights assigned to each position BlueCrest Capital Mgmt. allocated the biggest weight to Brooge Energy Limited (NASDAQ:BROG), around 0.71% of its 13F portfolio. Magnetar Capital is also relatively very bullish on the stock, setting aside 0.59 percent of its 13F equity portfolio to BROG.

Consequently, specific money managers have jumped into Brooge Energy Limited (NASDAQ:BROG) headfirst. Magnetar Capital, managed by Alec Litowitz and Ross Laser, initiated the biggest position in Brooge Energy Limited (NASDAQ:BROG). Magnetar Capital had $24.5 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $6.6 million position during the quarter. The following funds were also among the new BROG investors: Ari Zweiman’s 683 Capital Partners, Andrew Weiss’s Weiss Asset Management, and David Alexander Witkin’s Beryl Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Brooge Energy Limited (NASDAQ:BROG) but similarly valued. These stocks are American Eagle Outfitters Inc. (NYSE:AEO), Corecivic Inc. (NYSE:CXW), Main Street Capital Corporation (NYSE:MAIN), and Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB). All of these stocks’ market caps match BROG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AEO 26 133187 2
CXW 18 109733 -7
MAIN 7 14571 -2
OMAB 4 29890 -2
Average 13.75 71845 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $49 million in BROG’s case. American Eagle Outfitters Inc. (NYSE:AEO) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB) is the least popular one with only 4 bullish hedge fund positions. Brooge Energy Limited (NASDAQ:BROG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately BROG wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BROG investors were disappointed as the stock returned -10.4% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.