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Parsley Energy Inc (PE) Buys Assets in Promising Southern Delaware Basin

The markets opened higher on Tuesday as banks gained heavily following speculation of an impending interest rate hike by the Federal Reserve. Among the stocks which are making gains today is Parsley Energy Inc (NYSE:PE), which has inched up by about 0.50% today after gaining as much as 2% earlier in the day. The now-modest gains are the result of the company announcing on Monday evening that it is going to buy assets in Pecos and Reeves Counties in Texas’ Southern Delaware Basin for $289.5 million in cash from a group of sellers. The deal includes mineral rights on 29,813 net acres and working interest covering 885 net acres for an extra $9 million. Parsley is expected to close the core deal by July 14, whereas the $9 million transaction was closed on May 10. Parsley Energy’s CEO Bryan Sheffield said in a statement that the deal is an important step towards unlocking the full potential of the company’s Southern Delaware assets.

Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. Parsley Energy Inc (NYSE:PE) has experienced an increase in activity from the world’s largest hedge funds in recent months. PE was in 36 hedge funds’ portfolios at the end of March. There were 30 hedge funds in our database with PE positions at the end of the previous quarter. At the end of this article we will also compare PE to other stocks including Bank Of The Ozarks Inc (NASDAQ:OZRK), MDU Resources Group Inc (NYSE:MDU), and DST Systems, Inc. (NYSE:DST) to get a better sense of its popularity.

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We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

Of the funds tracked by Insider Monkey, Zimmer Partners, managed by Stuart J. Zimmer, holds the largest position in Parsley Energy Inc (NYSE:PE). Zimmer Partners has a $148.2 million position in the stock, comprising 6.2% of its 13F portfolio. On Zimmer Partners’ heels is Millennium Management, led by Israel Englander, holding a $140.8 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other peers with similar optimism comprise John Labanowski’s Brenham Capital Management, Clint Carlson’s Carlson Capital, and Vince Maddi and Shawn Brennan’s SIR Capital Management.

On the next page we’ll look at some funds that took up positions in PE during Q1, as well as compare the stock to a handful of others with similar market caps.

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