Here’s What Hedge Funds Think Evolution Petroleum Corporation (EPM)

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 second quarter. One of these stocks was Evolution Petroleum Corporation (NYSE:EPM).

Evolution Petroleum Corporation (NYSE:EPM) has seen a decrease in hedge fund interest recently. Our calculations also showed that EPM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 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.

If you’d ask most traders, hedge funds are seen as slow, outdated investment tools of years past. While there are more than 8000 funds in operation today, We choose to focus on the top tier of this club, around 750 funds. These money managers manage the majority of all hedge funds’ total asset base, and by monitoring their first-class picks, Insider Monkey has revealed many investment strategies that have historically outperformed the market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

David Harding

David Harding of Winton Capital Management

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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a gander at the recent hedge fund action surrounding Evolution Petroleum Corporation (NYSE:EPM).

What have hedge funds been doing with Evolution Petroleum Corporation (NYSE:EPM)?

At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in EPM a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of Evolution Petroleum Corporation (NYSE:EPM), with a stake worth $14.2 million reported as of the end of September. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $1.8 million. GLG Partners, Two Sigma Advisors, and Winton Capital Management 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 Zebra Capital Management allocated the biggest weight to Evolution Petroleum Corporation (NYSE:EPM), around 0.07% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, earmarking 0.05 percent of its 13F equity portfolio to EPM.

Seeing as Evolution Petroleum Corporation (NYSE:EPM) has witnessed falling interest from the smart money, it’s safe to say that there is a sect of fund managers that slashed their full holdings last quarter. At the top of the heap, Cliff Asness’s AQR Capital Management sold off the biggest investment of the “upper crust” of funds followed by Insider Monkey, worth close to $0.6 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dropped its stock, about $0.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 2 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Evolution Petroleum Corporation (NYSE:EPM). We will take a look at Griffin Industrial Realty, Inc. (NASDAQ:GRIF), Standard Diversified Inc. (NYSE:SDI), DNB Financial Corp. (NASDAQ:DNBF), and Lifevantage Corporation (NASDAQ:LFVN). This group of stocks’ market values resemble EPM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GRIF 2 27297 0
SDI 4 4190 0
DNBF 5 11226 1
LFVN 8 18845 1
Average 4.75 15390 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $20 million in EPM’s case. Lifevantage Corporation (NASDAQ:LFVN) is the most popular stock in this table. On the other hand Griffin Industrial Realty, Inc.(NASDAQ:GRIF) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Evolution Petroleum Corporation (NYSE:EPM) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately EPM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EPM were disappointed as the stock returned -10.8% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.

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