U.S. markets closed

Did Hedge Funds Drop The Ball On Select Energy Services, Inc. (WTTR) ?

Reymerlyn Martin

Before we spend countless hours researching a company, we'd like to analyze what insiders, hedge funds and billionaire investors think of the stock first. We would like to do so 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 Select Energy Services, Inc. (NYSE:WTTR).

Is Select Energy Services, Inc. (NYSE:WTTR) a buy, sell, or hold? Prominent investors are reducing their bets on the stock. The number of long hedge fund bets retreated by 2 recently. Our calculations also showed that WTTR isn't among the 30 most popular stocks among hedge funds.

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.

TUDOR INVESTMENT CORP

Let's take a look at the key hedge fund action surrounding Select Energy Services, Inc. (NYSE:WTTR).

How are hedge funds trading Select Energy Services, Inc. (NYSE:WTTR)?

At the end of the fourth quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WTTR over the last 14 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

WTTR_may2019

Among these funds, Adage Capital Management held the most valuable stake in Select Energy Services, Inc. (NYSE:WTTR), which was worth $14.9 million at the end of the fourth quarter. On the second spot was Encompass Capital Advisors which amassed $11.9 million worth of shares. Moreover, Arosa Capital Management, Perella Weinberg Partners, and Daruma Asset Management were also bullish on Select Energy Services, Inc. (NYSE:WTTR), allocating a large percentage of their portfolios to this stock.

Because Select Energy Services, Inc. (NYSE:WTTR) has witnessed declining sentiment from the entirety of the hedge funds we track, it's easy to see that there were a few funds that slashed their full holdings heading into Q3. Interestingly, Jonathan Barrett and Paul Segal's Luminus Management said goodbye to the largest investment of the 700 funds monitored by Insider Monkey, valued at an estimated $8.3 million in stock, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund cut about $2.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 2 funds heading into Q3.

Let's now review hedge fund activity in other stocks similar to Select Energy Services, Inc. (NYSE:WTTR). We will take a look at Avon Products, Inc. (NYSE:AVP), SP Plus Corp (NASDAQ:SP), Ituran Location and Control Ltd. (US) (NASDAQ:ITRN), and Dicerna Pharmaceuticals Inc (NASDAQ:DRNA). All of these stocks' market caps resemble WTTR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AVP,24,129120,-2 SP,12,90100,0 ITRN,9,106305,-1 DRNA,20,247563,0 Average,16.25,143272,-0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $57 million in WTTR's case. Avon Products, Inc. (NYSE:AVP) is the most popular stock in this table. On the other hand Ituran Location and Control Ltd. (US) (NASDAQ:ITRN) is the least popular one with only 9 bullish hedge fund positions. Select Energy Services, Inc. (NYSE:WTTR) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on WTTR as the stock returned 93.4% and outperformed the market by an even larger margin.

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

Related Content