Northern Oil & Gas, Inc. (NOG): Hedge Fund Interest Cooling Off

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Northern Oil & Gas, Inc. (NYSEAMEX:NOG).

Northern Oil & Gas, Inc. (NYSEAMEX:NOG) was in 19 hedge funds’ portfolios at the end of the second quarter of 2019. NOG investors should pay attention to a decrease in activity from the world’s largest hedge funds of late. There were 20 hedge funds in our database with NOG holdings at the end of the previous quarter. Our calculations also showed that NOG isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.


In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources  like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Now we’re going to check out the fresh hedge fund action encompassing Northern Oil & Gas, Inc. (NYSEAMEX:NOG).

Hedge fund activity in Northern Oil & Gas, Inc. (NYSEAMEX:NOG)

At Q2’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards NOG over the last 16 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).


The largest stake in Northern Oil & Gas, Inc. (NYSEAMEX:NOG) was held by Angelo Gordon & Co, which reported holding $21.6 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $13.6 million position. Other investors bullish on the company included Portolan Capital Management, Balyasny Asset Management, and SIR Capital Management.

Since Northern Oil & Gas, Inc. (NYSEAMEX:NOG) has witnessed declining sentiment from hedge fund managers, we can see that there lies a certain “tier” of hedgies that elected to cut their full holdings heading into Q3. It’s worth mentioning that Sara Nainzadeh’s Centenus Global Management dropped the largest stake of the 750 funds monitored by Insider Monkey, comprising about $1.1 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dropped its stock, about $0.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 1 funds heading into Q3.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Northern Oil & Gas, Inc. (NYSEAMEX:NOG) but similarly valued. We will take a look at TrustCo Bank Corp NY (NASDAQ:TRST), Opus Bank (NASDAQ:OPB), SP Plus Corp (NASDAQ:SP), and C&J Energy Services, Inc (NYSE:CJ). All of these stocks’ market caps resemble NOG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TRST 12 46609 2
OPB 9 138307 -2
SP 13 96170 -1
CJ 21 154618 -4
Average 13.75 108926 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $87 million in NOG’s case. C&J Energy Services, Inc (NYSE:CJ) is the most popular stock in this table. On the other hand Opus Bank (NASDAQ:OPB) is the least popular one with only 9 bullish hedge fund positions. Northern Oil & Gas, Inc. (NYSEAMEX:NOG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately NOG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NOG were disappointed as the stock returned 1.6% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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