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Is KLXE Stock A Buy Here?

·6 min read

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 866 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st. In this article we look at what those investors think of KLX Energy Services Holdings, Inc. (NASDAQ:KLXE).

Is KLXE stock a buy here? The smart money was cutting their exposure. The number of long hedge fund bets fell by 1 in recent months. KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) was in 5 hedge funds' portfolios at the end of March. The all time high for this statistic is 21. Our calculations also showed that KLXE isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 6 hedge funds in our database with KLXE holdings at the end of December.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Nick Thakore of Diametric Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. Now we're going to view the new hedge fund action regarding KLX Energy Services Holdings, Inc. (NASDAQ:KLXE).

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

At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in KLXE over the last 23 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is KLXE A Good Stock To Buy?
Is KLXE A Good Stock To Buy?

More specifically, Diametric Capital was the largest shareholder of KLX Energy Services Holdings, Inc. (NASDAQ:KLXE), with a stake worth $0.9 million reported as of the end of March. Trailing Diametric Capital was Prelude Capital (previously Springbok Capital), which amassed a stake valued at $0.6 million. Bailard Inc, Arrowstreet Capital, and GAMCO Investors 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 Diametric Capital allocated the biggest weight to KLX Energy Services Holdings, Inc. (NASDAQ:KLXE), around 0.71% of its 13F portfolio. Bailard Inc is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to KLXE.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Melqart Asset Management. 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 KLXE as a viable investment and initiated a position in the stock.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) but similarly valued. We will take a look at Citizens Community Bancorp Inc. (NASDAQ:CZWI), GasLog Partners LP (NYSE:GLOP), SB Financial Group, Inc. (NASDAQ:SBFG), Envela Corporation (NYSE:ELA), Hawthorn Bancshares, Inc. (NASDAQ:HWBK), Middlefield Banc Corp. (NASDAQ:MBCN), and Vislink Technologies, Inc. (NASDAQ:VISL). This group of stocks' market values resemble KLXE's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CZWI,4,15388,-1 GLOP,8,8765,3 SBFG,3,10143,1 ELA,4,2087,2 HWBK,2,1981,1 MBCN,3,12270,0 VISL,4,588,3 Average,4,7317,1.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $2 million in KLXE's case. GasLog Partners LP (NYSE:GLOP) is the most popular stock in this table. On the other hand Hawthorn Bancshares, Inc. (NASDAQ:HWBK) is the least popular one with only 2 bullish hedge fund positions. KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KLXE is 36.1. 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. 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 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 17.4% in 2021 through June 18th and beat the market again by 6.1 percentage points. Unfortunately KLXE wasn't nearly as popular as these 5 stocks and hedge funds that were betting on KLXE were disappointed as the stock returned -37.6% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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