At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Era Group Inc (NYSE:ERA).
Era Group Inc (NYSE:ERA) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds' portfolios at the end of the first quarter of 2020. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Provident Financial Holdings, Inc. (NASDAQ:PROV), OP Bancorp (NASDAQ:OPBK), and Olympic Steel, Inc. (NASDAQ:ZEUS) to gather more data points. Our calculations also showed that ERA isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 58 percentage points since March 2017 (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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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David Harding of Winton Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's take a glance at the key hedge fund action surrounding Era Group Inc (NYSE:ERA).
How are hedge funds trading Era Group Inc (NYSE:ERA)?
At the end of the first quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ERA over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of Era Group Inc (NYSE:ERA), with a stake worth $8.9 million reported as of the end of September. Trailing Royce & Associates was D E Shaw, which amassed a stake valued at $1.3 million. Newtyn Management, Arrowstreet Capital, and Millennium Management 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 Newtyn Management allocated the biggest weight to Era Group Inc (NYSE:ERA), around 0.42% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.12 percent of its 13F equity portfolio to ERA.
Because Era Group Inc (NYSE:ERA) has experienced declining sentiment from the aggregate hedge fund industry, it's safe to say that there exists a select few hedgies that slashed their entire stakes last quarter. Intriguingly, Gavin Saitowitz and Cisco J. del Valle's Springbok Capital dropped the largest position of the "upper crust" of funds watched by Insider Monkey, worth about $0.2 million in stock, and David Harding's Winton Capital Management was right behind this move, as the fund cut about $0.2 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks similar to Era Group Inc (NYSE:ERA). These stocks are Provident Financial Holdings, Inc. (NASDAQ:PROV), OP Bancorp (NASDAQ:OPBK), Olympic Steel, Inc. (NASDAQ:ZEUS), and Oasis Petroleum Inc. (NYSE:OAS). This group of stocks' market values match ERA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PROV,2,7424,0 OPBK,6,7622,1 ZEUS,5,2807,-1 OAS,13,3969,-4 Average,6.5,5456,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $13 million in ERA's case. Oasis Petroleum Inc. (NYSE:OAS) is the most popular stock in this table. On the other hand Provident Financial Holdings, Inc. (NASDAQ:PROV) is the least popular one with only 2 bullish hedge fund positions. Era Group Inc (NYSE:ERA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately ERA wasn't nearly as popular as these 10 stocks and hedge funds that were betting on ERA were disappointed as the stock returned 15.2% 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.