Is Nabors Industries Ltd. (NYSE:NBR) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Nabors Industries Ltd. (NYSE:NBR) shareholders have witnessed a decrease in support from the world's most elite money managers lately. Our calculations also showed that NBR isn't among the 30 most popular stocks among hedge funds.
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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let's take a glance at the latest hedge fund action surrounding Nabors Industries Ltd. (NYSE:NBR).
What have hedge funds been doing with Nabors Industries Ltd. (NYSE:NBR)?
Heading into the second quarter of 2019, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in NBR over the last 15 quarters. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Israel Englander's Millennium Management has the most valuable position in Nabors Industries Ltd. (NYSE:NBR), worth close to $54.8 million, amounting to 0.1% of its total 13F portfolio. On Millennium Management's heels is Omega Advisors, led by Leon Cooperman, holding a $32.6 million position; 2% of its 13F portfolio is allocated to the company. Other peers that hold long positions comprise Ken Griffin's Citadel Investment Group, Todd J. Kantor's Encompass Capital Advisors and Joel Greenblatt's Gotham Asset Management.
Because Nabors Industries Ltd. (NYSE:NBR) has experienced bearish sentiment from the smart money, it's safe to say that there exists a select few money managers that elected to cut their full holdings in the third quarter. It's worth mentioning that Anand Parekh's Alyeska Investment Group cut the largest position of all the hedgies tracked by Insider Monkey, comprising about $10.3 million in call options. Dmitry Balyasny's fund, Balyasny Asset Management, also dropped its call options, about $8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks similar to Nabors Industries Ltd. (NYSE:NBR). We will take a look at TTM Technologies, Inc. (NASDAQ:TTMI), 3D Systems Corporation (NYSE:DDD), Twin River Worldwide Holdings, Inc. (NYSE:TRWH), and Brookdale Senior Living, Inc. (NYSE:BKD). This group of stocks' market valuations are similar to NBR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TTMI,13,43308,-2 DDD,13,62191,2 TRWH,10,311993,10 BKD,27,362928,1 Average,15.75,195105,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $195 million. That figure was $176 million in NBR's case. Brookdale Senior Living, Inc. (NYSE:BKD) is the most popular stock in this table. On the other hand Twin River Worldwide Holdings, Inc. (NYSE:TRWH) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Nabors Industries Ltd. (NYSE:NBR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately NBR wasn't nearly as popular as these 20 stocks and hedge funds that were betting on NBR were disappointed as the stock returned -33.1% during the same period 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 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.