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Hedge Funds Are Betting On EOG Resources Inc (EOG)

We at Insider Monkey have gone over 752 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article, we look at what those funds think of EOG Resources Inc (NYSE:EOG) based on that data.

EOG Resources Inc (NYSE:EOG) has experienced an increase in enthusiasm from smart money of late. Our calculations also showed that EOG 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.

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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

Let’s view the recent hedge fund action encompassing EOG Resources Inc (NYSE:EOG).

What have hedge funds been doing with EOG Resources Inc (NYSE:EOG)?

At the end of the third quarter, a total of 48 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EOG over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

EOG_nov2019

Among these funds, Two Sigma Advisors held the most valuable stake in EOG Resources Inc (NYSE:EOG), which was worth $256.3 million at the end of the third quarter. On the second spot was Lyrical Asset Management which amassed $224 million worth of shares. D E Shaw, Citadel Investment Group, and Millennium Management 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 Southport Management allocated the biggest weight to EOG Resources Inc (NYSE:EOG), around 4.7% of its portfolio. Lodge Hill Capital is also relatively very bullish on the stock, designating 3.85 percent of its 13F equity portfolio to EOG.

Now, key hedge funds have jumped into EOG Resources Inc (NYSE:EOG) headfirst. Alyeska Investment Group, managed by Anand Parekh, assembled the most outsized position in EOG Resources Inc (NYSE:EOG). Alyeska Investment Group had $36.3 million invested in the company at the end of the quarter. Todd J. Kantor’s Encompass Capital Advisors also initiated a $33.8 million position during the quarter. The following funds were also among the new EOG investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, John Murphy’s Levin Easterly Partners, and Clint Murray’s Lodge Hill Capital.

Let’s now review hedge fund activity in other stocks similar to EOG Resources Inc (NYSE:EOG). We will take a look at Biogen Inc. (NASDAQ:BIIB), Public Storage (NYSE:PSA), Capital One Financial Corp. (NYSE:COF), and The Bank of New York Mellon Corporation (NYSE:BK). This group of stocks’ market values are similar to EOG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BIIB 48 4207480 5
PSA 22 876105 2
COF 42 1936605 0
BK 50 5638516 17
Average 40.5 3164677 6

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.5 hedge funds with bullish positions and the average amount invested in these stocks was $3165 million. That figure was $1450 million in EOG’s case. The Bank of New York Mellon Corporation (NYSE:BK) is the most popular stock in this table. On the other hand Public Storage (NYSE:PSA) is the least popular one with only 22 bullish hedge fund positions. EOG Resources Inc (NYSE:EOG) 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 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately EOG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EOG were disappointed as the stock returned -1.2% during the fourth quarter (through 11/22) 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.

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