Do Hedge Funds Love Rosehill Resources Inc. (ROSE)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Rosehill Resources Inc. (NASDAQ:ROSE) based on that data.

Rosehill Resources Inc. (NASDAQ:ROSE) was in 4 hedge funds’ portfolios at the end of March. ROSE investors should pay attention to an increase in enthusiasm from smart money in recent months. There were 3 hedge funds in our database with ROSE positions at the end of the previous quarter. Our calculations also showed that ROSE 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 51 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.

Anchorage Capital 2014 Q2 Investor Letter

Kevin Michael Ulrich of Anchorage Advisors

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. Now we’re going to analyze the latest hedge fund action regarding Rosehill Resources Inc. (NASDAQ:ROSE).

Hedge fund activity in Rosehill Resources Inc. (NASDAQ:ROSE)

At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the previous quarter. By comparison, 6 hedge funds held shares or bullish call options in ROSE a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Kevin Michael Ulrich and Anthony Davis’s Anchorage Advisors has the biggest position in Rosehill Resources Inc. (NASDAQ:ROSE), worth close to $0.2 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by Anchorage Advisors, managed by Kevin Michael Ulrich and Anthony Davis, which holds a $0.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other peers that are bullish encompass Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, Renaissance Technologies and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Anchorage Advisors allocated the biggest weight to Rosehill Resources Inc. (NASDAQ:ROSE), around 0.01% of its 13F portfolio. Anchorage Advisors is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to ROSE.

As industrywide interest jumped, specific money managers were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, established the biggest position in Rosehill Resources Inc. (NASDAQ:ROSE). Citadel Investment Group had $0 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0 million investment in the stock during the quarter.

Let’s now review hedge fund activity in other stocks similar to Rosehill Resources Inc. (NASDAQ:ROSE). We will take a look at BBQ Holdings, Inc. (NASDAQ:BBQ), KLX Energy Services Holdings, Inc. (NASDAQ:KLXE), Lazydays Holdings, Inc. (NASDAQ:LAZY), and Zion Oil & Gas Inc (NASDAQ:ZN). All of these stocks’ market caps resemble ROSE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BBQ 4 7092 1
KLXE 14 2577 -5
LAZY 5 3627 0
ZN 2 553 -1
Average 6.25 3462 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $0 million in ROSE’s case. KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) is the most popular stock in this table. On the other hand Zion Oil & Gas Inc (NASDAQ:ZN) is the least popular one with only 2 bullish hedge fund positions. Rosehill Resources Inc. (NASDAQ:ROSE) 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately ROSE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ROSE investors were disappointed as the stock returned -18.1% 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.