Hedge Funds Are Crazy About Jagged Peak Energy Inc. (JAG)

With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Jagged Peak Energy Inc. (NYSE:JAG).

Is Jagged Peak Energy Inc. (NYSE:JAG) a bargain? The best stock pickers are getting more bullish. The number of bullish hedge fund bets moved up by 5 recently. Our calculations also showed that JAG isn’t among the 30 most popular stocks among hedge funds. JAG was in 15 hedge funds’ portfolios at the end of the third quarter of 2018. There were 10 hedge funds in our database with JAG holdings at the end of the previous quarter.

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 market by 18 percentage points since May 2014 through December 3, 2018 (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 our short portfolio.

Phill Gross, Adage Capital Management

Let’s check out the new hedge fund action encompassing Jagged Peak Energy Inc. (NYSE:JAG).

How have hedgies been trading Jagged Peak Energy Inc. (NYSE:JAG)?

At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the previous quarter. The graph below displays the number of hedge funds with bullish position in JAG over the last 13 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.


The largest stake in Jagged Peak Energy Inc. (NYSE:JAG) was held by Encompass Capital Advisors, which reported holding $42.5 million worth of stock at the end of September. It was followed by Marshall Wace LLP with a $13.9 million position. Other investors bullish on the company included Adage Capital Management, Millennium Management, and Citadel Investment Group.

Consequently, specific money managers were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the most valuable position in Jagged Peak Energy Inc. (NYSE:JAG). Marshall Wace LLP had $13.9 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $11.7 million position during the quarter. The other funds with new positions in the stock are Mike Vranos’s Ellington, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, and Alec Litowitz and Ross Laser’s Magnetar Capital.

Let’s go over hedge fund activity in other stocks similar to Jagged Peak Energy Inc. (NYSE:JAG). We will take a look at LendingTree, Inc (NASDAQ:TREE), NorthWestern Corporation (NYSE:NWE), Nuveen AMT-Free Municipal Credit Income Fund (NYSE:NVG), and Sogou Inc. (NYSE:SOGO). All of these stocks’ market caps are similar to JAG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TREE 18 69523 -1
NWE 15 135790 2
NVG 3 571 -1
SOGO 6 8954 -3
Average 10.5 53710 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $94 million in JAG’s case. LendingTree, Inc (NASDAQ:TREE) is the most popular stock in this table. On the other hand Nuveen AMT-Free Municipal Credit Income Fund (NYSE:NVG) is the least popular one with only 3 bullish hedge fund positions. Jagged Peak Energy Inc. (NYSE:JAG) 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. In this regard TREE might be a better candidate to consider a long position.

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