Extraction Oil & Gas, Inc. (XOG) Is Burning These Hedge Funds

“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Extraction Oil & Gas, Inc. (NASDAQ:XOG) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Extraction Oil & Gas, Inc. (NASDAQ:XOG) was in 17 hedge funds’ portfolios at the end of June. XOG has experienced a decrease in hedge fund interest in recent months. There were 20 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 (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most shareholders, hedge funds are viewed as underperforming, old investment vehicles of years past. While there are more than 8000 funds with their doors open today, We look at the top tier of this group, about 750 funds. These money managers control most of the smart money’s total capital, and by keeping track of their finest investments, Insider Monkey has figured out a number of investment strategies that have historically defeated the market. Insider Monkey’s flagship hedge fund strategy outstripped the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .


Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to view the latest hedge fund action encompassing Extraction Oil & Gas, Inc. (NASDAQ:XOG).

Hedge fund activity in Extraction Oil & Gas, Inc. (NASDAQ:XOG)

Heading into the third quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in XOG a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


Among these funds, Luminus Management held the most valuable stake in Extraction Oil & Gas, Inc. (NASDAQ:XOG), which was worth $50.7 million at the end of the second quarter. On the second spot was Beach Point Capital Management which amassed $8.8 million worth of shares. Moreover, Point72 Asset Management, Maverick Capital, and AQR Capital Management were also bullish on Extraction Oil & Gas, Inc. (NASDAQ:XOG), allocating a large percentage of their portfolios to this stock.

Due to the fact that Extraction Oil & Gas, Inc. (NASDAQ:XOG) has experienced declining sentiment from hedge fund managers, it’s safe to say that there exists a select few money managers who sold off their full holdings heading into Q3. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the biggest investment of the 750 funds watched by Insider Monkey, valued at an estimated $17.6 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund dropped about $4.8 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 3 funds heading into Q3.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Extraction Oil & Gas, Inc. (NASDAQ:XOG) but similarly valued. We will take a look at Urstadt Biddle Properties Inc. (NYSE:UBP), Houghton Mifflin Harcourt Co (NASDAQ:HMHC), Mobileiron Inc (NASDAQ:MOBL), and Intersect ENT Inc (NASDAQ:XENT). This group of stocks’ market caps are closest to XOG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UBP 2 12600 0
HMHC 14 201951 -11
MOBL 17 119966 0
XENT 15 281752 -8
Average 12 154067 -4.75

View table here if you experience formatting issues.

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 $154 million. That figure was $92 million in XOG’s case. Mobileiron Inc (NASDAQ:MOBL) is the most popular stock in this table. On the other hand Urstadt Biddle Properties Inc. (NYSE:UBP) 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately XOG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on XOG were disappointed as the stock returned -32.1% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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