Do Hedge Funds Love Contango Oil & Gas Company (MCF)?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Contango Oil & Gas Company (NYSEMKT:MCF).

Hedge fund interest in Contango Oil & Gas Company (NYSEMKT:MCF) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare MCF to other stocks including Scorpio Bulkers Inc (NYSE:SALT), Franklin Covey Co. (NYSE:FC), and Electrum Special Acquisition Corp (NASDAQ:ELECU) to get a better sense of its popularity.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

Keeping this in mind, we’re going to take a look at the key action surrounding Contango Oil & Gas Company (NYSEMKT:MCF).

What does the smart money think about Contango Oil & Gas Company (NYSEMKT:MCF)?

At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged over the quarter. The graph below displays the number of hedge funds with bullish position in MCF over the last 5 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John W. Rogers’ Ariel Investments has the largest position in Contango Oil & Gas Company (NYSEMKT:MCF), worth close to $39.1 million, amounting to 0.5% of its total 13F portfolio. Sitting at the No. 2 spot is Oaktree Capital Management, led by Howard Marks, which holds a $13.3 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism consist of Cliff Asness’ AQR Capital Management, Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners, and Mark Travis’s Intrepid Capital Management. We should note that two of these hedge funds (GRT Capital Partners and Intrepid Capital Management) are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Highbridge Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was D E Shaw).

Let’s now review hedge fund activity in other stocks similar to Contango Oil & Gas Company (NYSEMKT:MCF). We will take a look at Scorpio Bulkers Inc (NYSE:SALT), Franklin Covey Co. (NYSE:FC), Electrum Special Acquisition Corp (NASDAQ:ELECU), and Lantheus Holdings Inc (NASDAQ:LNTH). This group of stocks’ market valuations match MCF’s market valuation.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $63 million in MCF’s case. Electrum Special Acquisition Corp (NASDAQ:ELECU) is the most popular stock in this table. On the other hand Franklin Covey Co. (NYSE:FC) is the least popular one with only eight bullish hedge fund positions. Contango Oil & Gas Company (NYSEMKT:MCF) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ELECU might be a better candidate to consider taking a long position in.

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Disclosure: None