Cabot Oil & Gas (COG) Has Risen 8% in Last One Year, Underperforms Market

Alex Smith

If you are looking for the best ideas for your portfolio you may want to consider some of RiverPark Advisors top stock picks. RiverPark Advisors, an investment management firm, is bullish on Cabot Oil & Gas Corp (NYSE:COG) stock. In its Q2 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on Cabot Oil & Gas Corp (NYSE:COG) stock. Cabot Oil & Gas Corp (NYSE:COG) is a company engaged in hydrocarbon exploration.

In July 2019, RiverPark Advisors had released its Q2 2019 investor letter. The investment firm said that Cabot Oil & Gas Corp (NYSE:COG) stock was one of the top detractors to the Large Growth fund's performance in Q2 2019. Cabot Oil & Gas Corp (NYSE:COG) stock has posted a return of 8.2% in the trailing one year period, underperforming the S&P 500 Index which returned 11.8% in the same period. This suggests that the investment firm was wrong in its decision. On a year-to-date basis, Cabot Oil & Gas Corp (NYSE:COG) stock has risen by 11.5%.

In Q2 2019 investor letter, RiverPark Advisors said the Large Growth fund posted a return of 7.4% in the second quarter of 2019, outperforming fund's benchmark the S&P 500 Index which returned 4.3% in the same period. Let’s take a look at comments made by RiverPark Advisors about Cabot Oil & Gas Corp (NYSE:COG) stock in the Q2 2019 investor letter.

"Cabot Oil & Gas: COG shares followed the price of natural gas lower in June as the commodity had declined 18% at one point during the quarter. Even in this still volatile commodity price environment, COG’s fundamentals remain strong (the company remains the low cost leader in natural gas production in the industry). The company reported solid results with production ahead of management’s guidance, as well as better-than-expected EPS, EBITDA and cash flow, and management reiterated 2019 guidance of 20% production growth on a capital spending budget of $800 million. Beyond 2019, the company intends to continue to grow production at double-digit rates on a stable capital base, further growing its free cash flow. As we have noted in previous updates, Cabot has achieved strong production growth in excess of capital spending, producing a widening pool of free cash flow, which is a rarity in the E&P industry. That free cash flow is currently expected to be returned to shareholders in the form of a growing dividend and a substantial increase in share repurchases. Earlier this year COG announced its fourth dividend increase of the last two years, to a current 1.6% yield, as a component of its commitment to return over 50% of annual free cash flow to shareholders. We believe the company can cover this dividend with FCF at a gas price as low as $2.20 (vs. $2.31 today), demonstrating the strength of the company’s low cost structure and high-returning Marcellus shale assets (the largest natural gas field in the U.S.). We maintained our small COG position in the Fund during the quarter."

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Copyright: Elnur / 123RF Stock Photo

In Q2 2020, the number of bullish hedge fund positions on Cabot Oil & Gas Corp (NYSE:COG) stock decreased by about 16% from the previous quarter (see the chart here), so a number of other hedge fund managers don't seem to agree with COG's growth potential. Our calculations showed that Cabot Oil & Gas Corp (NYSE:COG) isn't ranked among the 30 most popular stocks among hedge funds.

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Video: Top 5 Stocks Among Hedge Funds

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