Hedge Funds Never Been Less Bullish On Extraction Oil & Gas, Inc. (XOG)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about Extraction Oil & Gas, Inc. (NASDAQ:XOG)?

Extraction Oil & Gas, Inc. (NASDAQ:XOG) shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months. XOG was in 6 hedge funds’ portfolios at the end of March. There were 12 hedge funds in our database with XOG holdings at the end of the previous quarter. Our calculations also showed that XOG 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Harding

David Harding of Winton Capital Management

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 we’re going to take a look at the key hedge fund action surrounding Extraction Oil & Gas, Inc. (NASDAQ:XOG).

What does smart money think about Extraction Oil & Gas, Inc. (NASDAQ:XOG)?

Heading into the second quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -50% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in XOG a year ago. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Is XOG A Good Stock To Buy?

More specifically, Luminus Management was the largest shareholder of Extraction Oil & Gas, Inc. (NASDAQ:XOG), with a stake worth $2.7 million reported as of the end of September. Trailing Luminus Management was Beach Point Capital Management, which amassed a stake valued at $0.8 million. Winton Capital Management, Citadel Investment Group, and Miller Value Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Beach Point Capital Management allocated the biggest weight to Extraction Oil & Gas, Inc. (NASDAQ:XOG), around 0.79% of its 13F portfolio. Luminus Management is also relatively very bullish on the stock, designating 0.27 percent of its 13F equity portfolio to XOG.

Because Extraction Oil & Gas, Inc. (NASDAQ:XOG) has faced falling interest from the smart money, logic holds that there exists a select few fund managers that decided to sell off their entire stakes by the end of the first quarter. Intriguingly, Steve Cohen’s Point72 Asset Management dumped the largest stake of all the hedgies followed by Insider Monkey, comprising close to $3 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $1.6 million worth. These transactions are interesting, as total hedge fund interest fell by 6 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Extraction Oil & Gas, Inc. (NASDAQ:XOG) but similarly valued. These stocks are Wayside Technology Group, Inc. (NASDAQ:WSTG), Computer Task Group, Inc. (NASDAQ:CTG), Jerash Holdings (US), Inc. (NASDAQ:JRSH), and AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO). This group of stocks’ market values are similar to XOG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WSTG 2 4150 0
CTG 7 9934 1
JRSH 3 837 0
AVEO 4 781 -2
Average 4 3926 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $4 million in XOG’s case. Computer Task Group, Inc. (NASDAQ:CTG) is the most popular stock in this table. On the other hand Wayside Technology Group, Inc. (NASDAQ:WSTG) is the least popular one with only 2 bullish hedge fund positions. Extraction Oil & Gas, Inc. (NASDAQ:XOG) is not the most popular stock in this group but hedge fund interest is still above average. 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 but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on XOG as the stock returned 70.6% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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