Is BCEI A Good Stock To Buy Now?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Bonanza Creek Energy Inc (NYSE:BCEI) based on that data.

Is BCEI a good stock to buy now? Bonanza Creek Energy Inc (NYSE:BCEI) investors should be aware of an increase in enthusiasm from smart money in recent months. Bonanza Creek Energy Inc (NYSE:BCEI) was in 16 hedge funds’ portfolios at the end of September. The all time high for this statistic is 22. Our calculations also showed that BCEI isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to take a look at the key hedge fund action surrounding Bonanza Creek Energy Inc (NYSE:BCEI).

Do Hedge Funds Think BCEI Is A Good Stock To Buy Now?

At third quarter’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BCEI over the last 21 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Is BCEI A Good Stock To Buy?

Among these funds, Mangrove Partners held the most valuable stake in Bonanza Creek Energy Inc (NYSE:BCEI), which was worth $38.7 million at the end of the third quarter. On the second spot was Divisar Capital which amassed $6.6 million worth of shares. Arrowstreet Capital, Diamond Hill Capital, and SIR 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 Mangrove Partners allocated the biggest weight to Bonanza Creek Energy Inc (NYSE:BCEI), around 4.9% of its 13F portfolio. Divisar Capital is also relatively very bullish on the stock, earmarking 2.19 percent of its 13F equity portfolio to BCEI.

As aggregate interest increased, key money managers have jumped into Bonanza Creek Energy Inc (NYSE:BCEI) headfirst. Diamond Hill Capital, managed by Ric Dillon, assembled the most valuable position in Bonanza Creek Energy Inc (NYSE:BCEI). Diamond Hill Capital had $3.2 million invested in the company at the end of the quarter. Vince Maddi and Shawn Brennan’s SIR Capital Management also initiated a $2.3 million position during the quarter. The other funds with brand new BCEI positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Israel Englander’s Millennium Management, and Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital).

Let’s go over hedge fund activity in other stocks similar to Bonanza Creek Energy Inc (NYSE:BCEI). We will take a look at Granite Point Mortgage Trust Inc. (NYSE:GPMT), Kimball International Inc (NASDAQ:KBAL), Golden Entertainment Inc (NASDAQ:GDEN), Arrow Financial Corporation (NASDAQ:AROW), BioSpecifics Technologies Corp. (NASDAQ:BSTC), Xenon Pharmaceuticals Inc (NASDAQ:XENE), and Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH). All of these stocks’ market caps are similar to BCEI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GPMT 13 20830 3
KBAL 19 68221 3
GDEN 12 67167 -3
AROW 3 10861 0
BSTC 9 48738 1
XENE 26 195443 -1
RUTH 11 39044 -3
Average 13.3 64329 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.3 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $63 million in BCEI’s case. Xenon Pharmaceuticals Inc (NASDAQ:XENE) is the most popular stock in this table. On the other hand Arrow Financial Corporation (NASDAQ:AROW) is the least popular one with only 3 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. Our overall hedge fund sentiment score for BCEI is 56.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on BCEI as the stock returned 16% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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