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Hedge Funds Are Dumping Schlumberger Limited. (SLB)

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At Insider Monkey, we pore over the filings of nearly 873 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of June 30th. In this article, we will use that wealth of knowledge to determine whether or not Schlumberger Limited. (NYSE:SLB) makes for a good investment right now.

Schlumberger Limited. (NYSE:SLB) was in 41 hedge funds' portfolios at the end of June. The all time high for this statistic is 61. SLB investors should pay attention to a decrease in hedge fund interest recently. There were 50 hedge funds in our database with SLB positions at the end of the first quarter. Our calculations also showed that SLB isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

William Gray Orbis Investment Management
William Gray Orbis Investment Management

William Gray of Orbis Investment Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 we're going to take a glance at the key hedge fund action surrounding Schlumberger Limited. (NYSE:SLB).

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

At the end of June, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from one quarter earlier. On the other hand, there were a total of 53 hedge funds with a bullish position in SLB a year ago. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

The largest stake in Schlumberger Limited. (NYSE:SLB) was held by Fisher Asset Management, which reported holding $496.7 million worth of stock at the end of June. It was followed by D E Shaw with a $156.3 million position. Other investors bullish on the company included Citadel Investment Group, Orbis Investment Management, and Masters Capital Management. In terms of the portfolio weights assigned to each position Chiron Investment Management allocated the biggest weight to Schlumberger Limited. (NYSE:SLB), around 3.94% of its 13F portfolio. Lodge Hill Capital is also relatively very bullish on the stock, setting aside 3.67 percent of its 13F equity portfolio to SLB.

Judging by the fact that Schlumberger Limited. (NYSE:SLB) has witnessed declining sentiment from the aggregate hedge fund industry, it's easy to see that there were a few funds that decided to sell off their entire stakes heading into Q3. It's worth mentioning that Mike Masters's Masters Capital Management dumped the largest position of the "upper crust" of funds tracked by Insider Monkey, valued at an estimated $27.2 million in stock. Till Bechtolsheimer's fund, Arosa Capital Management, also sold off its stock, about $10.8 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 9 funds heading into Q3.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Schlumberger Limited. (NYSE:SLB) but similarly valued. We will take a look at TE Connectivity Ltd. (NYSE:TEL), BCE Inc. (NYSE:BCE), Match Group, Inc. (NASDAQ:MTCH), Marriott International Inc (NASDAQ:MAR), L3Harris Technologies, Inc. (NYSE:LHX), Ross Stores, Inc. (NASDAQ:ROST), and Trane Technologies plc (NYSE:TT). This group of stocks' market caps resemble SLB's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TEL,39,2134995,0 BCE,14,113288,4 MTCH,63,3368893,-5 MAR,49,2454304,-9 LHX,42,1016540,1 ROST,51,1448653,3 TT,37,1250491,2 Average,42.1,1683881,-0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.1 hedge funds with bullish positions and the average amount invested in these stocks was $1684 million. That figure was $1067 million in SLB's case. Match Group, Inc. (NASDAQ:MTCH) is the most popular stock in this table. On the other hand BCE Inc. (NYSE:BCE) is the least popular one with only 14 bullish hedge fund positions. Schlumberger Limited. (NYSE:SLB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SLB is 43.7. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. A small number of hedge funds were also right about betting on SLB as the stock returned 1.9% since the end of the second quarter (through 10/11) and outperformed the market by an even larger margin.

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