Hedge Funds Have Never Been More Bullish On Kosmos Energy Ltd (KOS)

Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 2.6% in the first two months of the second quarter. Ten out of 11 industry groups in the S&P 500 Index lost value in May. The average return of a randomly picked stock in the index was even worse (-3.6%). This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 20 most popular S&P 500 stocks among hedge funds not only generated positive returns but also outperformed the index by about 3 percentage points through May 30th. In this article, we will take a look at what hedge funds think about Kosmos Energy Ltd (NYSE:KOS).

Kosmos Energy Ltd (NYSE:KOS) has experienced an increase in activity from the world’s largest hedge funds recently. KOS was in 18 hedge funds’ portfolios at the end of the first quarter of 2019. There were 14 hedge funds in our database with KOS positions at the end of the previous quarter. Our calculations also showed that kos isn’t among the 30 most popular stocks among hedge funds.

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 40 percentage points since May 2014 through May 30, 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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Dmitry Balyasny

We’re going to take a look at the new hedge fund action surrounding Kosmos Energy Ltd (NYSE:KOS).

Hedge fund activity in Kosmos Energy Ltd (NYSE:KOS)

Heading into the second quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from the fourth quarter of 2018. On the other hand, there were a total of 13 hedge funds with a bullish position in KOS a year ago. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

No of Hedge Funds with KOS Positions

Among these funds, Millennium Management held the most valuable stake in Kosmos Energy Ltd (NYSE:KOS), which was worth $46.9 million at the end of the first quarter. On the second spot was SailingStone Capital Partners which amassed $22.4 million worth of shares. Moreover, Balyasny Asset Management, Citadel Investment Group, and Adage Capital Management were also bullish on Kosmos Energy Ltd (NYSE:KOS), allocating a large percentage of their portfolios to this stock.

As industrywide interest jumped, some big names have been driving this bullishness. Segantii Capital, managed by Simon Sadler, created the largest position in Kosmos Energy Ltd (NYSE:KOS). Segantii Capital had $3.3 million invested in the company at the end of the quarter. Zilvinas Mecelis’s Covalis Capital also initiated a $2.9 million position during the quarter. The other funds with brand new KOS positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Benjamin A. Smith’s Laurion Capital Management, and Cliff Asness’s AQR Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to Kosmos Energy Ltd (NYSE:KOS). We will take a look at International Bancshares Corp (NASDAQ:IBOC), Meredith Corporation (NYSE:MDP), First Bancorp (NYSE:FBP), and Cirrus Logic, Inc. (NASDAQ:CRUS). This group of stocks’ market values are closest to KOS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IBOC 14 151399 -5
MDP 11 294686 -1
FBP 18 246590 -2
CRUS 17 226684 -3
Average 15 229840 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $230 million. That figure was $118 million in KOS’s case. First Bancorp (NYSE:FBP) is the most popular stock in this table. On the other hand Meredith Corporation (NYSE:MDP) is the least popular one with only 11 bullish hedge fund positions. Kosmos Energy Ltd (NYSE:KOS) 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately KOS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on KOS were disappointed as the stock returned -2.2% during the same period 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 13 of these stocks already outperformed the market so far in Q2.

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