Is Roan Resources, Inc. (ROAN) A Good Stock To Buy ?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Roan Resources, Inc. (NYSE:ROAN).

Roan Resources, Inc. (NYSE:ROAN) investors should pay attention to a decrease in support from the world’s most elite money managers recently. Our calculations also showed that ROAN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To most shareholders, hedge funds are seen as underperforming, outdated investment tools of years past. While there are over 8000 funds trading today, Our researchers look at the leaders of this club, around 750 funds. It is estimated that this group of investors oversee the majority of the hedge fund industry’s total asset base, and by paying attention to their top investments, Insider Monkey has formulated a few investment strategies that have historically outperformed the market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .


Paul Singer of Elliott Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the latest hedge fund action encompassing Roan Resources, Inc. (NYSE:ROAN).

What does smart money think about Roan Resources, Inc. (NYSE:ROAN)?

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ROAN over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is ROAN A Good Stock To Buy?

More specifically, Elliott Management was the largest shareholder of Roan Resources, Inc. (NYSE:ROAN), with a stake worth $20.1 million reported as of the end of September. Trailing Elliott Management was Fir Tree, which amassed a stake valued at $18.1 million. York Capital Management, Avenue Capital, and Canyon Capital Advisors 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 Fir Tree allocated the biggest weight to Roan Resources, Inc. (NYSE:ROAN), around 1.76% of its 13F portfolio. Farmstead Capital Management is also relatively very bullish on the stock, dishing out 1.75 percent of its 13F equity portfolio to ROAN.

Seeing as Roan Resources, Inc. (NYSE:ROAN) has faced falling interest from hedge fund managers, we can see that there were a few fund managers who were dropping their full holdings in the third quarter. It’s worth mentioning that Ari Zweiman’s 683 Capital Partners dropped the biggest investment of all the hedgies monitored by Insider Monkey, valued at an estimated $2.6 million in stock. Himanshu Gulati’s fund, Antara Capital, also cut its stock, about $0.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 1 funds in the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Roan Resources, Inc. (NYSE:ROAN) but similarly valued. We will take a look at First Northwest Bancorp (NASDAQ:FNWB), Nine Energy Service, Inc. (NYSE:NINE), Richmond Mutual Bancorporation, Inc. (NASDAQ:RMBI), and Lifetime Brands Inc (NASDAQ:LCUT). All of these stocks’ market caps resemble ROAN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FNWB 3 20926 1
NINE 7 17303 1
RMBI 3 3736 3
LCUT 3 16247 0
Average 4 14553 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $59 million in ROAN’s case. Nine Energy Service, Inc. (NYSE:NINE) is the most popular stock in this table. On the other hand First Northwest Bancorp (NASDAQ:FNWB) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Roan Resources, Inc. (NYSE:ROAN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on ROAN as the stock returned 23.6% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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