World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
National Energy Services Reunited Corp. (NASDAQ:NESR) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds' portfolios at the end of December. At the end of this article we will also compare NESR to other stocks including Perficient, Inc. (NASDAQ:PRFT), Goldman Sachs BDC, Inc. (NYSE:GSBD), and CSW Industrials, Inc. (NASDAQ:CSWI) to get a better sense of its popularity.
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 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 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.
Let's view the key hedge fund action surrounding National Energy Services Reunited Corp. (NASDAQ:NESR).
Hedge fund activity in National Energy Services Reunited Corp. (NASDAQ:NESR)
At the end of the fourth quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2018. On the other hand, there were a total of 8 hedge funds with a bullish position in NESR a year ago. With hedgies' sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Encompass Capital Advisors, managed by Todd J. Kantor, holds the largest position in National Energy Services Reunited Corp. (NASDAQ:NESR). Encompass Capital Advisors has a $22.7 million position in the stock, comprising 2.5% of its 13F portfolio. The second largest stake is held by Steve Pattyn of Yaupon Capital, with a $1.5 million position; the fund has 1% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions comprise Ari Zweiman's 683 Capital Partners, Brandon Osten's Venator Capital Management and .
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium 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 only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Yaupon Capital).
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as National Energy Services Reunited Corp. (NASDAQ:NESR) but similarly valued. We will take a look at Perficient, Inc. (NASDAQ:PRFT), Goldman Sachs BDC, Inc. (NYSE:GSBD), CSW Industrials, Inc. (NASDAQ:CSWI), and Meridian Bioscience, Inc. (NASDAQ:VIVO). This group of stocks' market valuations resemble NESR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRFT,14,21710,-5 GSBD,4,4834,0 CSWI,16,43765,6 VIVO,18,89748,1 Average,13,40014,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $25 million in NESR's case. Meridian Bioscience, Inc. (NASDAQ:VIVO) is the most popular stock in this table. On the other hand Goldman Sachs BDC, Inc. (NYSE:GSBD) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks National Energy Services Reunited Corp. (NASDAQ:NESR) is even less popular than GSBD. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on NESR, though not to the same extent, as the stock returned 21.6% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
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