Hedge Funds Piled Into Northern Oil & Gas (NOG) At The Wrong Time

With the first-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 first quarter. One of these stocks was Northern Oil & Gas, Inc. (NYSEAMEX:NOG). Northern Oil & Gas, Inc. (NYSEAMEX:NOG) was in 20 hedge funds’ portfolios at the end of March. NOG investors should pay attention to an increase in activity from the world’s largest hedge funds recently. There were 16 hedge funds in our database with NOG holdings at the end of the previous quarter. Our calculations also showed that NOG isn’t among the 30 most popular stocks among hedge funds.

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’ 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 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 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.


We’re going to check out the latest hedge fund action regarding Northern Oil & Gas, Inc. (NYSEAMEX:NOG).

What does smart money think about Northern Oil & Gas, Inc. (NYSEAMEX:NOG)?

Heading into the second quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the fourth quarter of 2018. By comparison, 8 hedge funds held shares or bullish call options in NOG a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).


More specifically, Citadel Investment Group was the largest shareholder of Northern Oil & Gas, Inc. (NYSEAMEX:NOG), with a stake worth $32.7 million reported as of the end of March. Trailing Citadel Investment Group was Angelo Gordon & Co, which amassed a stake valued at $30.7 million. Point72 Asset Management, Millennium Management, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

Consequently, specific money managers have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, assembled the most outsized position in Northern Oil & Gas, Inc. (NYSEAMEX:NOG). Point72 Asset Management had $20 million invested in the company at the end of the quarter. Till Bechtolsheimer’s Arosa Capital Management also made a $6.3 million investment in the stock during the quarter. The other funds with brand new NOG positions are George McCabe’s Portolan Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Louis Bacon’s Moore Global Investments.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Northern Oil & Gas, Inc. (NYSEAMEX:NOG) but similarly valued. These stocks are Despegar.com, Corp. (NYSE:DESP), Veracyte Inc (NASDAQ:VCYT), Luminex Corporation (NASDAQ:LMNX), and Cango Inc. (NYSE:CANG). This group of stocks’ market values are closest to NOG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DESP 15 226527 -4
VCYT 22 130377 5
LMNX 21 159503 2
CANG 2 681 0
Average 15 129272 0.75

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 $129 million. That figure was $141 million in NOG’s case. Veracyte Inc (NASDAQ:VCYT) is the most popular stock in this table. On the other hand Cango Inc. (NYSE:CANG) is the least popular one with only 2 bullish hedge fund positions. Northern Oil & Gas, Inc. (NYSEAMEX:NOG) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately NOG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NOG were disappointed as the stock returned -24.8% 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.