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Should You Buy Carrizo Oil & Gas, Inc. (CRZO)?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the first 6 weeks of the fourth quarter we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) to find out whether it was one of their high conviction long-term ideas.

Hedge fund interest in Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare CRZO to other stocks including Kayne Anderson MLP/Midstream Investment Company (NYSE:KYN), Atlantica Yield plc (NASDAQ:AY), and California Water Service Group (NYSE:CWT) to get a better sense of its popularity.

In the eyes of most stock holders, hedge funds are perceived as underperforming, old investment tools of years past. While there are greater than 8,000 funds in operation at present, Our experts hone in on the masters of this group, approximately 700 funds. It is estimated that this group of investors manage bulk of the hedge fund industry’s total asset base, and by paying attention to their highest performing picks, Insider Monkey has determined numerous investment strategies that have historically outstripped the market. Insider Monkey’s flagship hedge fund strategy beat the S&P 500 index by 6 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.

MILLENNIUM MANAGEMENT

Let’s review the fresh hedge fund action regarding Carrizo Oil & Gas, Inc. (NASDAQ:CRZO).

How have hedgies been trading Carrizo Oil & Gas, Inc. (NASDAQ:CRZO)?

At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, representing no change from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CRZO over the last 13 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

CRZO_dec2018

Among these funds, Zimmer Partners held the most valuable stake in Carrizo Oil & Gas, Inc. (NASDAQ:CRZO), which was worth $76.9 million at the end of the third quarter. On the second spot was Lion Point which amassed $50.4 million worth of shares. Moreover, Millennium Management, SIR Capital Management, and Renaissance Technologies were also bullish on Carrizo Oil & Gas, Inc. (NASDAQ:CRZO), allocating a large percentage of their portfolios to this stock.

Judging by the fact that Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) has faced falling interest from hedge fund managers, logic holds that there lies a certain “tier” of funds that slashed their entire stakes in the third quarter. Interestingly, Benjamin A. Smith’s Laurion Capital Management sold off the largest investment of the 700 funds watched by Insider Monkey, comprising about $38.7 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dropped about $17.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) but similarly valued. These stocks are Kayne Anderson MLP/Midstream Investment Company (NYSE:KYN), Atlantica Yield plc (NASDAQ:AY), California Water Service Group (NYSE:CWT), and Central Garden & Pet Co (NASDAQ:CENT). This group of stocks’ market caps are similar to CRZO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KYN 3 7379 1
AY 20 326511 1
CWT 3 3420 -3
CENT 20 158186 1
Average 11.5 123874 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $232 million in CRZO’s case. Atlantica Yield plc (NASDAQ:AY) is the most popular stock in this table. On the other hand Kayne Anderson MLP/Midstream Investment Company (NYSE:KYN) is the least popular one with only 3 bullish hedge fund positions. Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) 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. In this regard AY might be a better candidate to consider a long position.

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

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