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Hedge Funds Started Dumping EOG Resources Inc (EOG) Even Before Coronavirus Crash

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about EOG Resources Inc (NYSE:EOG) in this article.

Is EOG Resources Inc (NYSE:EOG) worth your attention right now? Money managers are getting less optimistic. The number of long hedge fund bets dropped by 10 recently. Our calculations also showed that EOG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To most investors, hedge funds are assumed to be worthless, old financial tools of the past. While there are greater than 8000 funds in operation today, Our researchers choose to focus on the aristocrats of this club, about 850 funds. These hedge fund managers handle most of all hedge funds’ total asset base, and by monitoring their top equity investments, Insider Monkey has spotted numerous investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind we’re going to take a peek at the recent hedge fund action surrounding EOG Resources Inc (NYSE:EOG).

What have hedge funds been doing with EOG Resources Inc (NYSE:EOG)?

Heading into the first quarter of 2020, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EOG over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is EOG A Good Stock To Buy?

More specifically, Two Sigma Advisors was the largest shareholder of EOG Resources Inc (NYSE:EOG), with a stake worth $307 million reported as of the end of September. Trailing Two Sigma Advisors was Lyrical Asset Management, which amassed a stake valued at $270.7 million. D E Shaw, Renaissance Technologies, and GLG Partners 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 Lyrical Asset Management allocated the biggest weight to EOG Resources Inc (NYSE:EOG), around 3.68% of its 13F portfolio. Southport Management is also relatively very bullish on the stock, setting aside 3.54 percent of its 13F equity portfolio to EOG.

Seeing as EOG Resources Inc (NYSE:EOG) has witnessed falling interest from hedge fund managers, we can see that there were a few money managers who were dropping their positions entirely heading into Q4. Interestingly, Ken Griffin’s Citadel Investment Group dumped the biggest investment of the 750 funds watched by Insider Monkey, comprising about $84.9 million in stock. Todd J. Kantor’s fund, Encompass Capital Advisors, also cut its stock, about $33.8 million worth. These transactions are important to note, as total hedge fund interest dropped by 10 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to EOG Resources Inc (NYSE:EOG). These stocks are Edwards Lifesciences Corporation (NYSE:EW), Humana Inc (NYSE:HUM), Waste Management, Inc. (NYSE:WM), and Aon plc (NYSE:AON). This group of stocks’ market valuations resemble EOG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EW 45 1283127 9
HUM 75 4982047 10
WM 32 3261844 -20
AON 51 2627235 6
Average 50.75 3038563 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 50.75 hedge funds with bullish positions and the average amount invested in these stocks was $3039 million. That figure was $1486 million in EOG’s case. Humana Inc (NYSE:HUM) is the most popular stock in this table. On the other hand Waste Management, Inc. (NYSE:WM) is the least popular one with only 32 bullish hedge fund positions. EOG Resources Inc (NYSE:EOG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but beat the market by 3.1 percentage points. Unfortunately EOG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); EOG investors were disappointed as the stock returned -53.5% during the same time 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 most of these stocks already outperformed the market in Q1.

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

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