There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don't cover. Because of Carl Icahn and other elite funds' exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Exterran Corporation (NYSE:EXTN).
Exterran Corporation (NYSE:EXTN) was in 14 hedge funds' portfolios at the end of June. EXTN has seen a decrease in enthusiasm from smart money of late. There were 18 hedge funds in our database with EXTN holdings at the end of the previous quarter. Our calculations also showed that EXTN isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most traders, hedge funds are assumed to be worthless, old financial tools of yesteryear. While there are greater than 8000 funds in operation at the moment, Our researchers hone in on the masters of this group, around 750 funds. Most estimates calculate that this group of people have their hands on the lion's share of the hedge fund industry's total capital, and by tailing their first-class investments, Insider Monkey has identified numerous investment strategies that have historically beaten Mr. Market. Insider Monkey's flagship hedge fund strategy outperformed the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a look at the latest hedge fund action regarding Exterran Corporation (NYSE:EXTN).
How are hedge funds trading Exterran Corporation (NYSE:EXTN)?
At Q2's end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in EXTN over the last 16 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Exterran Corporation (NYSE:EXTN) was held by Magnetar Capital, which reported holding $17.3 million worth of stock at the end of March. It was followed by Cannell Capital with a $12.6 million position. Other investors bullish on the company included Renaissance Technologies, Millennium Management, and Encompass Capital Advisors.
Since Exterran Corporation (NYSE:EXTN) has experienced falling interest from the entirety of the hedge funds we track, it's easy to see that there was a specific group of money managers that elected to cut their positions entirely in the second quarter. Intriguingly, Noam Gottesman's GLG Partners cut the biggest position of the "upper crust" of funds watched by Insider Monkey, valued at about $2.5 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund dumped about $0.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds in the second quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Exterran Corporation (NYSE:EXTN) but similarly valued. We will take a look at Century Bancorp, Inc. (NASDAQ:CNBKA), Puma Biotechnology Inc (NASDAQ:PBYI), UMH Properties, Inc (NYSE:UMH), and City Office REIT Inc (NYSE:CIO). All of these stocks' market caps resemble EXTN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CNBKA,3,14692,1 PBYI,17,130423,-6 UMH,9,13264,0 CIO,6,24486,1 Average,8.75,45716,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $66 million in EXTN's case. Puma Biotechnology Inc (NASDAQ:PBYI) is the most popular stock in this table. On the other hand Century Bancorp, Inc. (NASDAQ:CNBKA) is the least popular one with only 3 bullish hedge fund positions. Exterran Corporation (NYSE:EXTN) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately EXTN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on EXTN were disappointed as the stock returned -8.2% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 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.