Here’s What Hedge Funds Think About Bonanza Creek Energy Inc (BCEI)

At Insider Monkey we follow nearly 750 of the best-performing investors and even though many of them lost money in the last couple of months of 2018 (some actually delivered very strong returns), the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.

Is Bonanza Creek Energy Inc (NYSE:BCEI) worth your attention right now? Investors who are in the know are getting less optimistic. The number of long hedge fund bets dropped by 2 in recent months. Our calculations also showed that BCEI 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 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 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.

Nathaniel August - Mangrove Partners

Let’s review the new hedge fund action surrounding Bonanza Creek Energy Inc (NYSE:BCEI).

How have hedgies been trading Bonanza Creek Energy Inc (NYSE:BCEI)?

At the end of the fourth quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the second quarter of 2018. On the other hand, there were a total of 19 hedge funds with a bullish position in BCEI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


More specifically, Mangrove Partners was the largest shareholder of Bonanza Creek Energy Inc (NYSE:BCEI), with a stake worth $41.8 million reported as of the end of December. Trailing Mangrove Partners was Oaktree Capital Management, which amassed a stake valued at $35.1 million. Millennium Management, PAR Capital Management, and Brigade Capital were also very fond of the stock, giving the stock large weights in their portfolios.

Seeing as Bonanza Creek Energy Inc (NYSE:BCEI) has faced falling interest from the entirety of the hedge funds we track, we can see that there exists a select few funds that slashed their full holdings in the third quarter. Interestingly, Kevin Michael Ulrich and Anthony Davis’s Anchorage Advisors dropped the biggest stake of all the hedgies watched by Insider Monkey, comprising about $10.4 million in stock. Andy Redleaf’s fund, Whitebox Advisors, also said goodbye to its stock, about $0.6 million worth. These transactions are interesting, as total hedge fund interest fell by 2 funds in the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Bonanza Creek Energy Inc (NYSE:BCEI) but similarly valued. These stocks are NVE Corporation (NASDAQ:NVEC), Ciner Resources LP (NYSE:CINR), Fiesta Restaurant Group Inc (NASDAQ:FRGI), and PDL BioPharma Inc. (NASDAQ:PDLI). All of these stocks’ market caps resemble BCEI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NVEC 4 13069 -2
CINR 2 6364 0
FRGI 20 115693 0
PDLI 16 57468 4
Average 10.5 48149 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $159 million in BCEI’s case. Fiesta Restaurant Group Inc (NASDAQ:FRGI) is the most popular stock in this table. On the other hand Ciner Resources LP (NYSE:CINR) is the least popular one with only 2 bullish hedge fund positions. Bonanza Creek Energy Inc (NYSE:BCEI) 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 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. Unfortunately BCEI wasn’t nearly as popular as these 15 stock and hedge funds that were betting on BCEI were disappointed as the stock returned 16.4% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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