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Did Hedge Funds Drop The Ball On Nabors Industries Ltd. (NBR) ?

Reymerlyn Martin

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 have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider Nabors Industries Ltd. (NYSE:NBR) for your portfolio? We'll look to this invaluable collective wisdom for the answer.

Is Nabors Industries Ltd. (NYSE:NBR) worth your attention right now? The best stock pickers are selling. The number of bullish hedge fund bets shrunk by 7 recently. Our calculations also showed that NBR isn't among the 30 most popular stocks among hedge funds. NBR was in 32 hedge funds' portfolios at the end of December. There were 39 hedge funds in our database with NBR holdings at the end of the previous quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

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Let's analyze the key hedge fund action surrounding Nabors Industries Ltd. (NYSE:NBR).

How are hedge funds trading Nabors Industries Ltd. (NYSE:NBR)?

At the end of the fourth quarter, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NBR over the last 14 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

NBR_may2019

Among these funds, Citadel Investment Group held the most valuable stake in Nabors Industries Ltd. (NYSE:NBR), which was worth $20.6 million at the end of the fourth quarter. On the second spot was Omega Advisors which amassed $17.6 million worth of shares. Moreover, Millennium Management, Balyasny Asset Management, and Alyeska Investment Group were also bullish on Nabors Industries Ltd. (NYSE:NBR), allocating a large percentage of their portfolios to this stock.

Due to the fact that Nabors Industries Ltd. (NYSE:NBR) has witnessed bearish sentiment from the aggregate hedge fund industry, we can see that there exists a select few money managers that elected to cut their full holdings last quarter. Intriguingly, Todd J. Kantor's Encompass Capital Advisors dumped the biggest investment of the 700 funds watched by Insider Monkey, comprising about $23.8 million in stock, and Mike Masters's Masters Capital Management was right behind this move, as the fund said goodbye to about $18.5 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 7 funds last quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Nabors Industries Ltd. (NYSE:NBR) but similarly valued. These stocks are ImmunoGen, Inc. (NASDAQ:IMGN), OraSure Technologies, Inc. (NASDAQ:OSUR), Berry Petroleum Corporation (NASDAQ:BRY), and United Insurance Holdings Corp.(NDA) (NASDAQ:UIHC). This group of stocks' market caps are closest to NBR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IMGN,16,140927,-2 OSUR,21,108703,0 BRY,14,66829,0 UIHC,6,4923,2 Average,14.25,80346,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $120 million in NBR's case. OraSure Technologies, Inc. (NASDAQ:OSUR) is the most popular stock in this table. On the other hand United Insurance Holdings Corp.(NDA) (NASDAQ:UIHC) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Nabors Industries Ltd. (NYSE:NBR) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on NBR as the stock returned 99.6% and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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