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EPL Oil & Gas Inc (NYSE:EPL): Are Hedge Funds Right About This Stock? – QR Energy LP (NYSE:QRE), Carrizo Oil & Gas, Inc. (NASDAQ:CRZO)

EPL Oil & Gas Inc (NYSE:EPL) investors should be aware of an increase in activity from the world’s largest hedge funds in recent months.

According to most market participants, hedge funds are viewed as unimportant, outdated financial vehicles of yesteryear. While there are greater than 8000 funds trading today, we at Insider Monkey choose to focus on the leaders of this group, about 450 funds. It is estimated that this group controls the majority of the smart money’s total asset base, and by monitoring their best equity investments, we have deciphered a number of investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).

Clint Carlson

Equally as beneficial, positive insider trading sentiment is a second way to parse down the stock market universe. Just as you’d expect, there are a variety of reasons for an upper level exec to drop shares of his or her company, but just one, very clear reason why they would buy. Plenty of empirical studies have demonstrated the impressive potential of this method if you know where to look (learn more here).

Consequently, let’s take a look at the latest action surrounding EPL Oil & Gas Inc (NYSE:EPL).

Hedge fund activity in EPL Oil & Gas Inc (NYSE:EPL)

Heading into 2013, a total of 14 of the hedge funds we track held long positions in this stock, a change of 8% from the previous quarter. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings substantially.

When looking at the hedgies we track, Wexford Capital, managed by Charles Davidson, holds the biggest position in EPL Oil & Gas Inc (NYSE:EPL). Wexford Capital has a $128 million position in the stock, comprising 9.4% of its 13F portfolio. On Wexford Capital’s heels is Carlson Capital, managed by Clint Carlson, which held a $77 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Remaining hedge funds that hold long positions include Chuck Royce’s Royce & Associates, Cliff Asness’s AQR Capital Management and D. E. Shaw’s D E Shaw.

As industrywide interest jumped, key hedge funds have jumped into EPL Oil & Gas Inc (NYSE:EPL) headfirst. Whitebox Advisors, managed by Andy Redleaf, established the largest position in EPL Oil & Gas Inc (NYSE:EPL). Whitebox Advisors had 3 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron’s Algert Coldiron Investors also made a $0 million investment in the stock during the quarter.

How are insiders trading EPL Oil & Gas Inc (NYSE:EPL)?

Bullish insider trading is particularly usable when the company in question has seen transactions within the past 180 days. Over the last six-month time frame, EPL Oil & Gas Inc (NYSE:EPL) has seen zero unique insiders purchasing, and 5 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to EPL Oil & Gas Inc (NYSE:EPL). These stocks are LinnCo LLC (NASDAQ:LNCO), QR Energy LP (NYSE:QRE), Diamondback Energy Inc (NASDAQ:FANG), Stone Energy Corporation (NYSE:SGY), and Carrizo Oil & Gas, Inc. (NASDAQ:CRZO). This group of stocks are the members of the independent oil & gas industry and their market caps match EPL’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
LinnCo LLC (NASDAQ:LNCO) 13 0 0
QR Energy LP (NYSE:QRE) 3 3 0
Diamondback Energy Inc (NASDAQ:FANG) 5 5 0
Stone Energy Corporation (NYSE:SGY) 15 0 0
Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) 8 0 7

With the results demonstrated by Insider Monkey’s strategies, everyday investors should always watch hedge fund and insider trading activity, and EPL Oil & Gas Inc (NYSE:EPL) is an important part of this process.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.