Were Hedge Funds Right About Ditching National Fuel Gas Company (NFG)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded National Fuel Gas Company (NYSE:NFG) and determine whether the smart money was really smart about this stock.

Is National Fuel Gas Company (NYSE:NFG) a good investment now? Prominent investors were selling. The number of bullish hedge fund positions retreated by 8 in recent months. Our calculations also showed that NFG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most shareholders, hedge funds are seen as unimportant, old investment tools of yesteryear. While there are more than 8000 funds trading at the moment, Our experts look at the aristocrats of this group, about 850 funds. It is estimated that this group of investors manage the majority of all hedge funds’ total capital, and by following their inimitable investments, Insider Monkey has determined numerous investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .


Joel Greenblatt of Gotham Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to view the key hedge fund action encompassing National Fuel Gas Company (NYSE:NFG).

How have hedgies been trading National Fuel Gas Company (NYSE:NFG)?

At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in NFG a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in National Fuel Gas Company (NYSE:NFG) was held by GAMCO Investors, which reported holding $74.9 million worth of stock at the end of September. It was followed by Winton Capital Management with a $9.1 million position. Other investors bullish on the company included Two Sigma Advisors, Millennium Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position GAMCO Investors allocated the biggest weight to National Fuel Gas Company (NYSE:NFG), around 0.88% of its 13F portfolio. Centenus Global Management is also relatively very bullish on the stock, dishing out 0.31 percent of its 13F equity portfolio to NFG.

Since National Fuel Gas Company (NYSE:NFG) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of hedge funds who sold off their full holdings by the end of the first quarter. Intriguingly, Gregg J. Powers’s Private Capital Management dropped the largest stake of the 750 funds followed by Insider Monkey, valued at about $10.5 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund sold off about $2.6 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 8 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to National Fuel Gas Company (NYSE:NFG). We will take a look at Safehold Inc. (NYSE:SAFE), Huntsman Corporation (NYSE:HUN), Parsons Corporation (NYSE:PSN), and Cemex SAB de CV (NYSE:CX). This group of stocks’ market values are closest to NFG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SAFE 5 7608 -2
HUN 21 305231 -18
PSN 15 93372 5
CX 12 98642 -1
Average 13.25 126213 -4

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $126 million. That figure was $104 million in NFG’s case. Huntsman Corporation (NYSE:HUN) is the most popular stock in this table. On the other hand Safehold Inc. (NYSE:SAFE) is the least popular one with only 5 bullish hedge fund positions. National Fuel Gas Company (NYSE:NFG) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but beat the market by 17.1 percentage points. Unfortunately NFG wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on NFG were disappointed as the stock returned 12% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

Follow National Fuel Gas Co (NYSE:NFG)

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