Did Hedge Funds Drop The Ball On Kosmos Energy Ltd (KOS) ?

The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Kosmos Energy Ltd (NYSE:KOS) from the perspective of those elite funds.

Kosmos Energy Ltd (NYSE:KOS) investors should pay attention to a decrease in hedge fund interest recently. KOS was in 14 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 18 hedge funds in our database with KOS holdings at the end of the previous quarter. Our calculations also showed that KOS isn’t among the 30 most popular stocks among hedge funds.

In the eyes of most shareholders, hedge funds are assumed to be underperforming, old financial tools of years past. While there are more than 8000 funds in operation today, We look at the moguls of this group, around 750 funds. These hedge fund managers command most of the hedge fund industry’s total capital, and by observing their finest investments, Insider Monkey has figured out many investment strategies that have historically outperformed Mr. Market. Insider Monkey’s flagship hedge fund strategy outstripped the S&P 500 index by nearly 5 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

Dmitry Balyasny

We’re going to check out the new hedge fund action surrounding Kosmos Energy Ltd (NYSE:KOS).

How have hedgies been trading Kosmos Energy Ltd (NYSE:KOS)?

Heading into the first quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards KOS over the last 14 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


The largest stake in Kosmos Energy Ltd (NYSE:KOS) was held by Zimmer Partners, which reported holding $30.5 million worth of stock at the end of December. It was followed by Millennium Management with a $25.8 million position. Other investors bullish on the company included SailingStone Capital Partners, Balyasny Asset Management, and Citadel Investment Group.

Due to the fact that Kosmos Energy Ltd (NYSE:KOS) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of funds that decided to sell off their positions entirely by the end of the third quarter. It’s worth mentioning that MacKenzie B. Davis and Kenneth L. Settles Jr’s SailingStone Capital Partners said goodbye to the largest position of the “upper crust” of funds watched by Insider Monkey, worth an estimated $112.8 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $22.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Kosmos Energy Ltd (NYSE:KOS) but similarly valued. These stocks are Innoviva, Inc. (NASDAQ:INVA), MSG Networks Inc (NYSE:MSGN), Oasis Petroleum Inc. (NYSE:OAS), and Covanta Holding Corporation (NYSE:CVA). This group of stocks’ market valuations resemble KOS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
INVA 22 311564 0
MSGN 20 264027 -3
OAS 31 298063 -2
CVA 20 65967 1
Average 23.25 234905 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $235 million. That figure was $107 million in KOS’s case. Oasis Petroleum Inc. (NYSE:OAS) is the most popular stock in this table. On the other hand MSG Networks Inc (NYSE:MSGN) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Kosmos Energy Ltd (NYSE:KOS) is even less popular than MSGN. Hedge funds clearly dropped the ball on KOS as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on KOS as the stock returned 72.7% and outperformed the market by an even larger margin.

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