Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year's Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to SAExploration Holdings, Inc. (NASDAQ:SAEX) changed recently.
SAExploration Holdings, Inc. (NASDAQ:SAEX) investors should be aware of a decrease in activity from the world's largest hedge funds recently. SAEX was in 5 hedge funds' portfolios at the end of the third quarter of 2019. There were 6 hedge funds in our database with SAEX positions at the end of the previous quarter. Our calculations also showed that SAEX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Nevertheless, overall hedge fund sentiment towards SAEX is still bullish. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_30576" align="alignnone" width="600"] Glenn Russell Dubin of Highbridge Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind we're going to take a glance at the key hedge fund action surrounding SAExploration Holdings, Inc. (NASDAQ:SAEX).
What have hedge funds been doing with SAExploration Holdings, Inc. (NASDAQ:SAEX)?
Heading into the fourth quarter of 2019, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SAEX over the last 17 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Highbridge Capital Management held the most valuable stake in SAExploration Holdings, Inc. (NASDAQ:SAEX), which was worth $0.7 million at the end of the third quarter. On the second spot was Blue Mountain Capital which amassed $0.4 million worth of shares. Whitebox Advisors, Minerva Advisors, and GLG Partners 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 Blue Mountain Capital allocated the biggest weight to SAExploration Holdings, Inc. (NASDAQ:SAEX), around 0.17% of its 13F portfolio. Highbridge Capital Management is also relatively very bullish on the stock, earmarking 0.1 percent of its 13F equity portfolio to SAEX.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified SAEX as a viable investment and initiated a position in the stock.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as SAExploration Holdings, Inc. (NASDAQ:SAEX) but similarly valued. We will take a look at Novus Therapeutics, Inc. (NASDAQ:NVUS), Genius Brands International, Inc. (NASDAQ:GNUS), Can-Fite Biopharma Ltd (NYSE:CANF), and Cyclacel Pharmaceuticals Inc (NASDAQ:CYCC). This group of stocks' market values are closest to SAEX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NVUS,5,3157,0 GNUS,1,11,0 CANF,1,48,0 CYCC,1,464,0 Average,2,920,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $2 million in SAEX's case. Novus Therapeutics, Inc. (NASDAQ:NVUS) is the most popular stock in this table. On the other hand Genius Brands International, Inc. (NASDAQ:GNUS) is the least popular one with only 1 bullish hedge fund positions. SAExploration Holdings, Inc. (NASDAQ:SAEX) is the most popular stock in this group together with Novus. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on SAEX as the stock returned 29.2% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.