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Hedge Funds Never Been Less Bullish On Nabors Industries Ltd. (NBR)

Abigail Fisher

In this article we will take a look at whether hedge funds think Nabors Industries Ltd. (NYSE:NBR) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Nabors Industries Ltd. (NYSE:NBR) was in 20 hedge funds' portfolios at the end of March. NBR has experienced a decrease in enthusiasm from smart money in recent months. There were 21 hedge funds in our database with NBR positions at the end of the previous quarter. Our calculations also showed that NBR 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.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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.

[caption id="attachment_758446" align="aligncenter" width="394"] Michael Hintze of CQS Cayman LP[/caption]

Michael Hintze CQS Capital
Michael Hintze CQS Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. 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. Keeping this in mind we're going to take a glance at the fresh hedge fund action regarding Nabors Industries Ltd. (NYSE:NBR).

How have hedgies been trading Nabors Industries Ltd. (NYSE:NBR)?

Heading into the second quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from one quarter earlier. On the other hand, there were a total of 30 hedge funds with a bullish position in NBR a year ago. With hedge funds' 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).

More specifically, Renaissance Technologies was the largest shareholder of Nabors Industries Ltd. (NYSE:NBR), with a stake worth $6.7 million reported as of the end of September. Trailing Renaissance Technologies was Omega Advisors, which amassed a stake valued at $5.7 million. LMR Partners, Miller Value Partners, and Ellington 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 Elm Ridge Capital allocated the biggest weight to Nabors Industries Ltd. (NYSE:NBR), around 1.44% of its 13F portfolio. Omega Advisors is also relatively very bullish on the stock, designating 0.74 percent of its 13F equity portfolio to NBR.

Seeing as Nabors Industries Ltd. (NYSE:NBR) has witnessed declining sentiment from the smart money, we can see that there were a few funds who were dropping their entire stakes heading into Q4. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital sold off the largest stake of the "upper crust" of funds followed by Insider Monkey, worth about $6 million in stock. D. E. Shaw's fund, D E Shaw, also dumped its stock, about $3.2 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 1 funds heading into Q4.

Let's now review hedge fund activity in other stocks similar to Nabors Industries Ltd. (NYSE:NBR). These stocks are Velocity Financial, Inc. (NYSE:VEL), Professional Holding Corp. (NASDAQ:PFHD), C&F Financial Corp (NASDAQ:CFFI), and Grupo Supervielle S.A. (NYSE:SUPV). This group of stocks' market caps match NBR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VEL,6,22821,6 PFHD,5,17973,5 CFFI,2,5789,0 SUPV,4,1290,-3 Average,4.25,11968,2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.25 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $18 million in NBR's case. Velocity Financial, Inc. (NYSE:VEL) is the most popular stock in this table. On the other hand C&F Financial Corp (NASDAQ:CFFI) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Nabors Industries Ltd. (NYSE:NBR) is more popular among hedge funds. 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 returned 12.2% in 2020 through June 17th but still managed to beat the market by 14.8 percentage points. Hedge funds were also right about betting on NBR as the stock returned 153.7% so far in Q2 (through June 17th) 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.

[company-follow-email id=1163739][/company-follow-email]

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

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