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Hedge Funds Are Buying Cabot Oil & Gas Corporation (COG)

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. We at Insider Monkey have plowed through 752 13F filings that hedge funds and well-known value 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 investors think of Cabot Oil & Gas Corporation (NYSE:COG).

Cabot Oil & Gas Corporation (NYSE:COG) was in 38 hedge funds’ portfolios at the end of the third quarter of 2019. COG has seen an increase in activity from the world’s largest hedge funds of late. There were 37 hedge funds in our database with COG positions at the end of the previous quarter. Our calculations also showed that COG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jonathan Barrett Luminus Management

Jonathan Barrett of Luminus Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the latest hedge fund action encompassing Cabot Oil & Gas Corporation (NYSE:COG).

What does smart money think about Cabot Oil & Gas Corporation (NYSE:COG)?

At the end of the third quarter, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in COG 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.

COG_nov2019

More specifically, D E Shaw was the largest shareholder of Cabot Oil & Gas Corporation (NYSE:COG), with a stake worth $109.2 million reported as of the end of September. Trailing D E Shaw was Citadel Investment Group, which amassed a stake valued at $104.4 million. Arrowstreet Capital, Two Sigma Advisors, and Luminus 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 Cabot Oil & Gas Corporation (NYSE:COG), around 2.97% of its portfolio. Deep Basin Capital is also relatively very bullish on the stock, designating 2.8 percent of its 13F equity portfolio to COG.

As aggregate interest increased, key money managers were leading the bulls’ herd. Soros Fund Management, managed by George Soros, assembled the most outsized position in Cabot Oil & Gas Corporation (NYSE:COG). Soros Fund Management had $17.6 million invested in the company at the end of the quarter. Todd J. Kantor’s Encompass Capital Advisors also initiated a $17.6 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace, Phill Gross and Robert Atchinson’s Adage Capital Management, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Cabot Oil & Gas Corporation (NYSE:COG). We will take a look at NovoCure Limited (NASDAQ:NVCR), 58.com Inc (NYSE:WUBA), Sociedad Quimica y Minera de Chile S.A. (NYSE:SQM), and Elbit Systems Ltd. (NASDAQ:ESLT). This group of stocks’ market values resemble COG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NVCR 22 375699 0
WUBA 24 331607 2
SQM 8 19977 1
ESLT 3 15834 -2
Average 14.25 185779 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $186 million. That figure was $667 million in COG’s case. 58.com Inc (NYSE:WUBA) is the most popular stock in this table. On the other hand Elbit Systems Ltd. (NASDAQ:ESLT) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Cabot Oil & Gas Corporation (NYSE:COG) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately COG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on COG were disappointed as the stock returned -8.8% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.

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

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