With the third-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 fourth quarter. One of these stocks was Northern Oil & Gas, Inc. (NYSE:NOG).
Is NOG a good stock to buy now? Money managers were getting less bullish. The number of bullish hedge fund positions were trimmed by 10 recently. Northern Oil & Gas, Inc. (NYSE:NOG) was in 12 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 22. Our calculations also showed that NOG 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). There were 22 hedge funds in our database with NOG positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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 let’s take a look at the new hedge fund action regarding Northern Oil & Gas, Inc. (NYSE:NOG).
Do Hedge Funds Think NOG Is A Good Stock To Buy Now?
At third quarter’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -45% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in NOG over the last 21 quarters. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, Angelo Gordon & Co was the largest shareholder of Northern Oil & Gas, Inc. (NYSE:NOG), with a stake worth $17.6 million reported as of the end of September. Trailing Angelo Gordon & Co was Hudson Bay Capital Management, which amassed a stake valued at $4.7 million. Arrowstreet Capital, Nokomis Capital, and Millennium 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 Angelo Gordon & Co allocated the biggest weight to Northern Oil & Gas, Inc. (NYSE:NOG), around 1.98% of its 13F portfolio. Nokomis Capital is also relatively very bullish on the stock, earmarking 0.88 percent of its 13F equity portfolio to NOG.
Because Northern Oil & Gas, Inc. (NYSE:NOG) has faced a decline in interest from the smart money, we can see that there lies a certain “tier” of funds that slashed their entire stakes last quarter. Intriguingly, Vince Maddi and Shawn Brennan’s SIR Capital Management dropped the biggest position of the 750 funds tracked by Insider Monkey, totaling an estimated $4.3 million in stock, and Kenneth Tropin’s Graham Capital Management was right behind this move, as the fund cut about $3 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 10 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Northern Oil & Gas, Inc. (NYSE:NOG). We will take a look at Enterprise Bancorp, Inc (NASDAQ:EBTC), Retail Value Inc. (NYSE:RVI), Chiasma Inc (NASDAQ:CHMA), Checkmate Pharmaceuticals, Inc. (NASDAQ:CMPI), NuZee, Inc. (NASDAQ:NUZE), Wrap Technologies, Inc. (NASDAQ:WRTC), and Ciner Resources LP (NYSE:CINR). This group of stocks’ market valuations match NOG’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.1 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $29 million in NOG’s case. Retail Value Inc. (NYSE:RVI) is the most popular stock in this table. On the other hand NuZee, Inc. (NASDAQ:NUZE) is the least popular one with only 1 bullish hedge fund positions. Northern Oil & Gas, Inc. (NYSE:NOG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NOG is 50.6. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on NOG as the stock returned 50.5% since the end of Q3 (through 12/8) 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.