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Hedge Funds Are Dumping VAALCO Energy, Inc. (EGY)

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 821 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 March 31st, a week after the market trough. In this article we look at what those investors think of VAALCO Energy, Inc. (NYSE:EGY).

Is VAALCO Energy, Inc. (NYSE:EGY) an outstanding stock to buy now? Investors who are in the know are in a bearish mood. The number of bullish hedge fund positions decreased by 1 in recent months. Our calculations also showed that EGY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Fred DiSanto Ancora Advisors

Fred DiSanto of Ancora Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a glance at the new hedge fund action surrounding VAALCO Energy, Inc. (NYSE:EGY).

What have hedge funds been doing with VAALCO Energy, Inc. (NYSE:EGY)?

At Q1’s end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in EGY over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is EGY A Good Stock To Buy?

The largest stake in VAALCO Energy, Inc. (NYSE:EGY) was held by Renaissance Technologies, which reported holding $3.4 million worth of stock at the end of September. It was followed by Fondren Management with a $2.2 million position. Other investors bullish on the company included Ancora Advisors, Arrowstreet Capital, and Winton Capital Management. In terms of the portfolio weights assigned to each position Fondren Management allocated the biggest weight to VAALCO Energy, Inc. (NYSE:EGY), around 5.66% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to EGY.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: ExodusPoint Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified EGY as a viable investment and initiated a position in the stock.

Let’s now review hedge fund activity in other stocks similar to VAALCO Energy, Inc. (NYSE:EGY). These stocks are DLH Holdings Corp. (NASDAQ:DLHC), Fauquier Bankshares, Inc. (NASDAQ:FBSS), Select Interior Concepts, Inc. (NASDAQ:SIC), and Alpine Immune Sciences, Inc. (NASDAQ:ALPN). All of these stocks’ market caps resemble EGY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DLHC 6 19477 0
FBSS 2 5892 0
SIC 14 9463 -3
ALPN 5 22035 -2
Average 6.75 14217 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $7 million in EGY’s case. Select Interior Concepts, Inc. (NASDAQ:SIC) is the most popular stock in this table. On the other hand Fauquier Bankshares, Inc. (NASDAQ:FBSS) is the least popular one with only 2 bullish hedge fund positions. VAALCO Energy, Inc. (NYSE:EGY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but still beat the market by 15.9 percentage points. Hedge funds were also right about betting on EGY as the stock returned 33% in Q2 (through June 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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