National Fuel Gas Company (NFG): Are Hedge Funds Right About This Stock?

·6 min read

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of National Fuel Gas Company (NYSE:NFG).

Is National Fuel Gas Company (NYSE:NFG) a superb investment now? Investors who are in the know were in a bullish mood. The number of bullish hedge fund bets inched up by 3 in recent months. National Fuel Gas Company (NYSE:NFG) was in 16 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 26. Our calculations also showed that NFG isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 13 hedge funds in our database with NFG positions at the end of the fourth quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Matthew Hulsizer PEAK6 Capital
Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let's go over the key hedge fund action encompassing National Fuel Gas Company (NYSE:NFG).

Do Hedge Funds Think NFG Is A Good Stock To Buy Now?

At Q1's end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in NFG over the last 23 quarters. With the smart money's capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Is NFG A Good Stock To Buy?
Is NFG A Good Stock To Buy?

More specifically, GAMCO Investors was the largest shareholder of National Fuel Gas Company (NYSE:NFG), with a stake worth $65.2 million reported as of the end of March. Trailing GAMCO Investors was Citadel Investment Group, which amassed a stake valued at $5.8 million. Arrowstreet Capital, Millennium Management, and Two Sigma Advisors 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 Yaupon Capital allocated the biggest weight to National Fuel Gas Company (NYSE:NFG), around 0.71% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, dishing out 0.57 percent of its 13F equity portfolio to NFG.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Holocene Advisors, managed by Brandon Haley, created the largest position in National Fuel Gas Company (NYSE:NFG). Holocene Advisors had $1.4 million invested in the company at the end of the quarter. Renaissance Technologies also made a $1.1 million investment in the stock during the quarter. The other funds with brand new NFG positions are Matthew Hulsizer's PEAK6 Capital Management, Steve Pattyn's Yaupon Capital, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as National Fuel Gas Company (NYSE:NFG) but similarly valued. These stocks are Asana Inc. (NYSE:ASAN), ShockWave Medical, Inc. (NASDAQ:SWAV), Allison Transmission Holdings Inc (NYSE:ALSN), The Wendy's Company (NASDAQ:WEN), B2Gold Corp (NYSE:BTG), Zhihu Inc. (NYSE:ZH), and Element Solutions Inc. (NYSE:ESI). This group of stocks' market values are closest to NFG's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ASAN,22,374549,4 SWAV,17,219798,-5 ALSN,30,498494,5 WEN,26,1018985,-5 BTG,18,313091,-4 ZH,23,94311,23 ESI,33,624419,4 Average,24.1,449092,3.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.1 hedge funds with bullish positions and the average amount invested in these stocks was $449 million. That figure was $93 million in NFG's case. Element Solutions Inc. (NYSE:ESI) is the most popular stock in this table. On the other hand ShockWave Medical, Inc. (NASDAQ:SWAV) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks National Fuel Gas Company (NYSE:NFG) is even less popular than SWAV. Our overall hedge fund sentiment score for NFG is 26.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds dodged a bullet by taking a bearish stance towards NFG. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd but managed to beat the market again by 10.1 percentage points. Unfortunately NFG wasn't nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); NFG investors were disappointed as the stock returned 3.2% since the end of the first quarter (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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

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