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Did Hedge Funds Drop The Ball On Euronav NV (EURN)?

Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

Is Euronav NV (NYSE:EURN) a marvelous stock to buy now? Prominent investors are reducing their bets on the stock. The number of bullish hedge fund bets decreased by 5 in recent months. Our calculations also showed that EURN isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Howard Marks OAKTREE CAPITAL MANAGEMENT

We’re going to take a glance at the key hedge fund action regarding Euronav NV (NYSE:EURN).

What have hedge funds been doing with Euronav NV (NYSE:EURN)?

At the end of the fourth quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -31% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in EURN a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

EURN_apr2019

Among these funds, Oaktree Capital Management held the most valuable stake in Euronav NV (NYSE:EURN), which was worth $63.7 million at the end of the fourth quarter. On the second spot was Blue Mountain Capital which amassed $17.6 million worth of shares. Moreover, Carlson Capital, QVT Financial, and Huber Capital Management were also bullish on Euronav NV (NYSE:EURN), allocating a large percentage of their portfolios to this stock.

Since Euronav NV (NYSE:EURN) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of hedgies who were dropping their full holdings by the end of the third quarter. Interestingly, David Rosen’s Rubric Capital Management said goodbye to the biggest investment of the 700 funds watched by Insider Monkey, comprising about $3.3 million in stock. Arvind Sanger’s fund, GeoSphere Capital Management, also said goodbye to its stock, about $1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 5 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Euronav NV (NYSE:EURN) but similarly valued. We will take a look at Heartland Financial USA Inc (NASDAQ:HTLF), NBT Bancorp Inc. (NASDAQ:NBTB), The Gabelli Dividend & Income Trust (NYSE:GDV), and Innospec Inc. (NASDAQ:IOSP). This group of stocks’ market caps are closest to EURN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HTLF 7 13228 1
NBTB 9 7733 1
GDV 2 5135 -1
IOSP 14 52822 2
Average 8 19730 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $130 million in EURN’s case. Innospec Inc. (NASDAQ:IOSP) is the most popular stock in this table. On the other hand The Gabelli Dividend & Income Trust (NYSE:GDV) is the least popular one with only 2 bullish hedge fund positions. Euronav NV (NYSE:EURN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on EURN as the stock returned 40.1% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.

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