There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Noble Energy, Inc. (NYSE:NBL).
Noble Energy, Inc. (NYSE:NBL) was included in the 13F portfolios of 33 investors tracked by Insider Monkey at the end of September. The company registered a decrease in support from smart money investors during the third quarter, as there had been 36 funds holding shares a quarter earlier. However, 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 Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP), Equifax Inc. (NYSE:EFX), and Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Now, let’s take a gander at the latest action encompassing Noble Energy, Inc. (NYSE:NBL).
Hedge fund activity in Noble Energy, Inc. (NYSE:NBL)
At the end of the third quarter, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in Noble Energy, down by 8% from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Eagle Capital Management, led by Boykin Curry, holds the biggest position in Noble Energy, Inc. (NYSE:NBL). Eagle Capital Management has a $476.3 million position in the stock, comprising 2.1% of its 13F portfolio. The second largest stake is held by Adage Capital Management, led by Phill Gross and Robert Atchinson, holding a $343.4 million position; 0.9% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that are bullish consist of Israel Englander’s Millennium Management, Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC, and Steve Cohen’s Point72 Asset Management.
Judging by the fact that Noble Energy, Inc. (NYSE:NBL) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of money managers that elected to cut their positions entirely last quarter. At the top of the heap, David M. Knott’s Dorset Management sold off the largest position of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $10 million in stock. Charles Clough’s fund, Clough Capital Partners, also dropped its stock, worth about $8.4 million.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Noble Energy, Inc. (NYSE:NBL) but similarly valued. These stocks are Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP), Equifax Inc. (NYSE:EFX), Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA), and Genuine Parts Company (NYSE:GPC). All of these stocks’ market caps are similar to NBL’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 37 funds with bullish positions and the average amount invested in these stocks was $1.33 billion. That figure was $1.37 billion in NBL’s case. Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) is the most popular stock in this table, while Genuine Parts Company (NYSE:GPC) is the least popular one with only 23 bullish hedge fund positions. Noble Energy, Inc. (NYSE:NBL) 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. In this regard Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) might be a better candidate to consider a long position.