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Is Oasis Petroleum Inc. (OAS) 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 Oasis Petroleum Inc. (NYSE:OAS).

Is Oasis Petroleum Inc. (NYSE:OAS) a buy, sell, or hold? Investors who are in the know are getting less optimistic. The number of bullish hedge fund positions retreated by 2 lately. 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 Marketo Inc (NASDAQ:MKTO), Examworks Group, Inc. (NYSE:EXAM), and Aduro BioTech Inc (NASDAQ:ADRO) to gather more data points.

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In the financial world there are plenty of methods investors put to use to grade publicly traded companies. Two of the less known methods are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can outclass their index-focused peers by a superb margin (see the details here).

Keeping this in mind, let’s go over the fresh action encompassing Oasis Petroleum Inc. (NYSE:OAS).

How have hedgies been trading Oasis Petroleum Inc. (NYSE:OAS)?

Heading into Q4, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, John H. Scully’s SPO Advisory Corp has the number one position in Oasis Petroleum Inc. (NYSE:OAS), worth close to $175.6 million, corresponding to 3% of its total 13F portfolio. Sitting at the No. 2 spot is Paulson & Co, led by John Paulson, holding a $71.8 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions encompass D. E. Shaw’s D E Shaw, Ken Griffin’s Citadel Investment Group and David Costen Haley’s HBK Investments.

Seeing as Oasis Petroleum Inc. (NYSE: OAS) has experienced a declining sentiment from hedge fund managers, it’s safe to say that there is a sect of hedge funds that slashed their entire stakes by the end of the third quarter. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management said goodbye to the biggest position of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $32.3 million in stock, and Kyle Bass’s Hayman Advisors was right behind this move, as the fund dropped about $18.7 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 2 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Oasis Petroleum Inc. (NYSE:OAS) but similarly valued. We will take a look at Marketo Inc (NASDAQ:MKTO), Examworks Group, Inc. (NYSE:EXAM), Aduro BioTech Inc (NASDAQ:ADRO), and Atlantic Tele-Network, Inc. (NASDAQ:ATNI). This group of stocks’ market valuations match OAS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MKTO 15 97152 -2
EXAM 13 100795 -2
ADRO 9 63154 -2
ATNI 9 41405 0

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $417 million in OAS’s case. Marketo Inc (NASDAQ:MKTO) is the most popular stock in this table. On the other hand Aduro BioTech Inc (NASDAQ:ADRO) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks, Oasis Petroleum Inc. (NYSE:OAS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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