Were Hedge Funds Right About EOG Resources Inc (EOG)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded EOG Resources Inc (NYSE:EOG) based on those filings.

EOG Resources Inc (NYSE:EOG) has seen a decrease in activity from the world’s largest hedge funds lately. Our calculations also showed that EOG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

According to most traders, hedge funds are seen as unimportant, old investment vehicles of the past. While there are more than 8000 funds trading at present, Our experts hone in on the bigwigs of this club, around 850 funds. Most estimates calculate that this group of people direct the lion’s share of the hedge fund industry’s total capital, and by tracking their top picks, Insider Monkey has unsheathed a few investment strategies that have historically outpaced Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed 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 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Charles Davidson - Wexford Capital

Charles Davidson of Wexford Capital

Keeping this in mind we’re going to take a look at the new hedge fund action encompassing EOG Resources Inc (NYSE:EOG).

What have hedge funds been doing with EOG Resources Inc (NYSE:EOG)?

At Q4’s end, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards EOG over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is EOG A Good Stock To Buy?

The largest stake in EOG Resources Inc (NYSE:EOG) was held by Two Sigma Advisors, which reported holding $307 million worth of stock at the end of September. It was followed by Lyrical Asset Management with a $270.7 million position. Other investors bullish on the company included D E Shaw, Renaissance Technologies, and GLG Partners. In terms of the portfolio weights assigned to each position Lyrical Asset Management allocated the biggest weight to EOG Resources Inc (NYSE:EOG), around 3.68% of its 13F portfolio. Southport Management is also relatively very bullish on the stock, designating 3.54 percent of its 13F equity portfolio to EOG.

Due to the fact that EOG Resources Inc (NYSE:EOG) has witnessed declining sentiment from the smart money, logic holds that there were a few hedgies that slashed their positions entirely by the end of the third quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group dropped the biggest position of the “upper crust” of funds followed by Insider Monkey, totaling about $84.9 million in stock, and Todd J. Kantor’s Encompass Capital Advisors was right behind this move, as the fund cut about $33.8 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 10 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as EOG Resources Inc (NYSE:EOG) but similarly valued. We will take a look at Edwards Lifesciences Corporation (NYSE:EW), Humana Inc (NYSE:HUM), Waste Management, Inc. (NYSE:WM), and Aon plc (NYSE:AON). This group of stocks’ market values are closest to EOG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EW 45 1283127 9
HUM 75 4982047 10
WM 32 3261844 -20
AON 51 2627235 6
Average 50.75 3038563 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 50.75 hedge funds with bullish positions and the average amount invested in these stocks was $3039 million. That figure was $1486 million in EOG’s case. Humana Inc (NYSE:HUM) is the most popular stock in this table. On the other hand Waste Management, Inc. (NYSE:WM) is the least popular one with only 32 bullish hedge fund positions. EOG Resources Inc (NYSE:EOG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately EOG wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); EOG investors were disappointed as the stock returned -46.1% 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 most of these stocks already outperformed the market in 2020.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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