Is Linn Energy LLC (LINE) A Good Stock To Buy?

Investing in small-cap stocks has historically been a way to outperform the market, as small-cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The time period between June 25 and the end of October was one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Linn Energy LLC (NASDAQ:LINE).

Linn Energy LLC (NASDAQ:LINE) investors should be aware of an increase in hedge fund interest in recent months. LINE was in 5 hedge funds’ portfolios at the end of September. There were 4 hedge funds in our database with LINE holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Cato Corp (NYSE:CATO), The Andersons, Inc. (NASDAQ:ANDE), and Stewart Information Services Corp (NYSE:STC) to gather more data points.

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To the average investor there are a large number of indicators shareholders put to use to grade stocks. A duo of the best indicators is composed of hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the top investment managers can outperform the broader indices by a significant amount (see the details here).

Keeping this in mind, we’re going to take a glance at the key action encompassing Linn Energy LLC (NASDAQ:LINE).

How have hedgies been trading Linn Energy LLC (NASDAQ:LINE)?

Heading into Q4, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the previous quarter. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Citadel Investment Group, managed by Ken Griffin, holds the number one position in Linn Energy LLC (NASDAQ:LINE). Citadel Investment Group has a $1 million call position in the stock, comprising less than 0.1%% of its 13F portfolio. On Citadel Investment Group’s heels is GMT Capital, led by Thomas E. Claugus, holding an $0.9 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism contain Matthew Lindenbaum’s Basswood Capital, Ken Griffin’s Citadel Investment Group and Matthew Hulsizer’s PEAK6 Capital Management.

As aggregate interest increased, some big names were breaking ground themselves. GMT Capital, managed by Thomas E. Claugus, established a position in Linn Energy LLC (NASDAQ:LINE). GMT Capital had $0.9 million invested in the company at the end of the quarter. Charles Goldblum’s Hurley Capital also made an $0 million investment in the stock during the quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Linn Energy LLC (NASDAQ:LINE). These stocks are Cato Corp (NYSE:CATO), The Andersons, Inc. (NASDAQ:ANDE), Stewart Information Services Corp (NYSE:STC), and Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI). This group of stocks’ market caps resemble LINE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CATO 11 108805 -1
ANDE 8 31544 -5
STC 14 232795 2
OLLI 10 25929 10

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $2 million in LINE’s case. Stewart Information Services Corp (NYSE:STC) is the most popular stock in this table, while the least popular one is The Andersons, Inc. (NASDAQ:ANDE). With only 5 bullish hedge fund positions, Linn Energy LLC (NASDAQ:LINE) is even less popular than ANDE. This indicates that Linn Energy LLC (NASDAQ:LINE) has not caught much attention from investors. To comprehend why smart money is not behind this stock, you should do further research. It is possible that investors thought of it as overvalued because they weren’t introduced with the bullish thesis. In either case, more analyses are needed.