Hedge Funds Never Been Less Bullish On Laredo Petroleum Inc (LPI)

In this article we will take a look at whether hedge funds think Laredo Petroleum Inc (NYSE:LPI) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is Laredo Petroleum Inc (NYSE:LPI) going to take off soon? The smart money is becoming less hopeful. The number of bullish hedge fund bets fell by 6 in recent months. Our calculations also showed that LPI 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.

In the 21st century investor’s toolkit there are a lot of formulas stock market investors use to appraise stocks. Two of the less utilized formulas are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the elite money managers can outclass the S&P 500 by a significant margin (see the details here).

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to analyze the fresh hedge fund action regarding Laredo Petroleum Inc (NYSE:LPI).

What does smart money think about Laredo Petroleum Inc (NYSE:LPI)?

At Q1’s end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -46% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards LPI over the last 18 quarters. With hedge funds’ 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).

Is LPI A Good Stock To Buy?

Among these funds, SailingStone Capital Partners held the most valuable stake in Laredo Petroleum Inc (NYSE:LPI), which was worth $1.7 million at the end of the third quarter. On the second spot was Luminus Management which amassed $1.4 million worth of shares. Water Street Capital, Millennium Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position SailingStone Capital Partners allocated the biggest weight to Laredo Petroleum Inc (NYSE:LPI), around 0.94% of its 13F portfolio. Luminus Management is also relatively very bullish on the stock, setting aside 0.15 percent of its 13F equity portfolio to LPI.

Judging by the fact that Laredo Petroleum Inc (NYSE:LPI) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of funds that elected to cut their positions entirely in the first quarter. At the top of the heap, Chuck Royce’s Royce & Associates sold off the biggest position of all the hedgies tracked by Insider Monkey, comprising about $12.6 million in stock. Steve Cohen’s fund, Point72 Asset Management, also dumped its stock, about $6.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 6 funds in the first quarter.

Let’s check out hedge fund activity in other stocks similar to Laredo Petroleum Inc (NYSE:LPI). We will take a look at On Deck Capital Inc (NYSE:ONDK), Auryn Resources Inc. (NYSE:AUG), Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE), and TELA Bio, Inc. (NASDAQ:TELA). This group of stocks’ market valuations resemble LPI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ONDK 15 34014 -2
AUG 1 85 -2
ZYNE 7 3948 1
TELA 8 27380 0
Average 7.75 16357 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $5 million in LPI’s case. On Deck Capital Inc (NYSE:ONDK) is the most popular stock in this table. On the other hand Auryn Resources Inc. (NYSE:AUG) is the least popular one with only 1 bullish hedge fund positions. Laredo Petroleum Inc (NYSE:LPI) is not the least popular stock in this group but hedge fund interest is still below 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on LPI as the stock returned 185.9% during the second quarter and outperformed the market by an even larger margin.

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