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Were Hedge Funds Right About Dumping Northern Oil & Gas, Inc. (NOG)?

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 Northern Oil & Gas, Inc. (NYSE:NOG) and determine whether the smart money was really smart about this stock.

Is Northern Oil & Gas, Inc. (NYSE:NOG) undervalued? Investors who are in the know were becoming less confident. The number of bullish hedge fund bets shrunk by 9 in recent months. Our calculations also showed that NOG 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). NOG was in 12 hedge funds’ portfolios at the end of the first quarter of 2020. There were 21 hedge funds in our database with NOG positions at the end of the previous quarter.

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

In the eyes of most investors, hedge funds are perceived as slow, old financial vehicles of years past. While there are greater than 8000 funds trading at present, Our researchers look at the crème de la crème of this club, about 850 funds. It is estimated that this group of investors have their hands on the lion’s share of the hedge fund industry’s total capital, and by keeping track of their inimitable investments, Insider Monkey has formulated various investment strategies that have historically outperformed the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum 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 .

Michael Platt BlueCrest Capital

Michael Platt of BlueCrest Capital Mgmt.

Now let’s go over the fresh hedge fund action regarding Northern Oil & Gas, Inc. (NYSE:NOG).

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

Heading into the second quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -43% from the fourth quarter of 2019. By comparison, 20 hedge funds held shares or bullish call options in NOG a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Angelo Gordon & Co held the most valuable stake in Northern Oil & Gas, Inc. (NYSE:NOG), which was worth $20.3 million at the end of the third quarter. On the second spot was Balyasny Asset Management which amassed $5 million worth of shares. SIR Capital Management, Nokomis Capital, and Arosa Capital Management 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 Angelo Gordon & Co allocated the biggest weight to Northern Oil & Gas, Inc. (NYSE:NOG), around 1.52% of its 13F portfolio. SIR Capital Management is also relatively very bullish on the stock, setting aside 1.34 percent of its 13F equity portfolio to NOG.

Due to the fact that Northern Oil & Gas, Inc. (NYSE:NOG) has faced falling interest from hedge fund managers, logic holds that there is a sect of money managers who sold off their entire stakes in the first quarter. At the top of the heap, George McCabe’s Portolan Capital Management sold off the biggest stake of the “upper crust” of funds tracked by Insider Monkey, valued at about $19.5 million in stock. D. E. Shaw’s fund, D E Shaw, also said goodbye to its stock, about $5 million worth. These moves are interesting, as total hedge fund interest was cut by 9 funds in the first quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Northern Oil & Gas, Inc. (NYSE:NOG) but similarly valued. These stocks are West Bancorporation, Inc. (NASDAQ:WTBA), Sierra Bancorp (NASDAQ:BSRR), Genco Shipping & Trading Limited (NYSE:GNK), and Pioneer Bancorp, Inc. (NASDAQ:PBFS). This group of stocks’ market values match NOG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WTBA 4 7660 -2
BSRR 5 9535 -3
GNK 12 135482 -4
PBFS 4 2873 1
Average 6.25 38888 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $34 million in NOG’s case. Genco Shipping & Trading Limited (NYSE:GNK) is the most popular stock in this table. On the other hand West Bancorporation, Inc. (NASDAQ:WTBA) is the least popular one with only 4 bullish hedge fund positions. Northern Oil & Gas, Inc. (NYSE:NOG) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on NOG as the stock returned 27.3% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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