We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds' top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Keane Group, Inc. (NYSE:FRAC).
Keane Group, Inc. (NYSE:FRAC) was in 21 hedge funds' portfolios at the end of June. FRAC shareholders have witnessed a decrease in activity from the world's largest hedge funds in recent months. There were 28 hedge funds in our database with FRAC positions at the end of the previous quarter. Our calculations also showed that FRAC 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.
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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. We're going to analyze the recent hedge fund action encompassing Keane Group, Inc. (NYSE:FRAC).
How are hedge funds trading Keane Group, Inc. (NYSE:FRAC)?
At the end of the second quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FRAC over the last 16 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Cerberus Capital Management was the largest shareholder of Keane Group, Inc. (NYSE:FRAC), with a stake worth $261.3 million reported as of the end of March. Trailing Cerberus Capital Management was Fisher Asset Management, which amassed a stake valued at $17.4 million. Citadel Investment Group, QVT Financial, and Balyasny Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as Keane Group, Inc. (NYSE:FRAC) has witnessed bearish sentiment from the aggregate hedge fund industry, it's safe to say that there were a few money managers who sold off their full holdings last quarter. Intriguingly, David Costen Haley's HBK Investments dumped the biggest stake of all the hedgies tracked by Insider Monkey, worth an estimated $2.1 million in stock, and Thiru Ramakrishnan's TVR Capital was right behind this move, as the fund dumped about $1.2 million worth. These moves are important to note, as total hedge fund interest fell by 7 funds last quarter.
Let's now take a look at hedge fund activity in other stocks similar to Keane Group, Inc. (NYSE:FRAC). We will take a look at Houghton Mifflin Harcourt Co (NASDAQ:HMHC), Mobileiron Inc (NASDAQ:MOBL), Intersect ENT Inc (NASDAQ:XENT), and CryoPort, Inc. (NASDAQ:CYRX). This group of stocks' market caps resemble FRAC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HMHC,14,201951,-11 MOBL,17,119966,0 XENT,15,281752,-8 CYRX,11,16610,4 Average,14.25,155070,-3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $155 million. That figure was $341 million in FRAC's case. Mobileiron Inc (NASDAQ:MOBL) is the most popular stock in this table. On the other hand CryoPort, Inc. (NASDAQ:CYRX) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Keane Group, Inc. (NYSE:FRAC) is more popular among hedge funds. 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 FRAC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on FRAC were disappointed as the stock returned -9.8% 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 in Q3.
Disclosure: None. This article was originally published at Insider Monkey.