A market correction in the fourth quarter, spurred by a number of global macroeconomic concerns and rising interest rates ended up having a negative impact on the markets and many hedge funds as a result. The stocks of smaller companies were especially hard hit during this time as investors fled to investments seen as being safer. This is evident in the fact that the Russell 2000 ETF underperformed the S&P 500 ETF by nearly 7 percentage points during the fourth quarter. We also received indications that hedge funds were trimming their positions amid the market volatility and uncertainty, and given their greater inclination towards smaller cap stocks than other investors, it follows that a stronger sell-off occurred in those stocks. Let’s study the hedge fund sentiment to see how those concerns affected their ownership of Berry Petroleum Corporation (NASDAQ:BRY) during the quarter.
Berry Petroleum Corporation (NASDAQ:BRY) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds’ portfolios at the end of December. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as United Insurance Holdings Corp.(NDA) (NASDAQ:UIHC), Delek Logistics Partners LP (NYSE:DKL), and G1 Therapeutics, Inc. (NASDAQ:GTHX) to gather more data points.
Why do we pay any attention at all to hedge fund sentiment? 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 market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s view the key hedge fund action encompassing Berry Petroleum Corporation (NASDAQ:BRY).
How have hedgies been trading Berry Petroleum Corporation (NASDAQ:BRY)?
At Q4’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in BRY a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
The largest stake in Berry Petroleum Corporation (NASDAQ:BRY) was held by Venor Capital Management, which reported holding $29.9 million worth of stock at the end of December. It was followed by Marathon Asset Management with a $17.1 million position. Other investors bullish on the company included Alyeska Investment Group, Driehaus Capital, and Adage Capital Management.
Due to the fact that Berry Petroleum Corporation (NASDAQ:BRY) has faced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there were a few money managers that elected to cut their positions entirely by the end of the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management dumped the biggest position of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $20.2 million in stock. Sara Nainzadeh’s fund, Centenus Global Management, also said goodbye to its stock, about $1.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to Berry Petroleum Corporation (NASDAQ:BRY). We will take a look at United Insurance Holdings Corp.(NDA) (NASDAQ:UIHC), Delek Logistics Partners LP (NYSE:DKL), G1 Therapeutics, Inc. (NASDAQ:GTHX), and Patrick Industries, Inc. (NASDAQ:PATK). This group of stocks’ market caps are similar to BRY’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $67 million in BRY’s case. Patrick Industries, Inc. (NASDAQ:PATK) is the most popular stock in this table. On the other hand Delek Logistics Partners LP (NYSE:DKL) is the least popular one with only 2 bullish hedge fund positions. Berry Petroleum Corporation (NASDAQ:BRY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on BRY as the stock returned 49.1% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.