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NexTier Oilfield Solutions Inc. (NEX) Fell Out Of Favor With Hedge Funds

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In this article you are going to find out whether hedge funds think NexTier Oilfield Solutions Inc. (NYSE:NEX) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. 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.

NexTier Oilfield Solutions Inc. (NYSE:NEX) has experienced a decrease in hedge fund sentiment of late. NexTier Oilfield Solutions Inc. (NYSE:NEX) was in 21 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 29. Our calculations also showed that NEX isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. With all of this in mind let's check out the latest hedge fund action regarding NexTier Oilfield Solutions Inc. (NYSE:NEX).

Bruce Kovner, Caxton Associates LP
Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

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

At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from one quarter earlier. By comparison, 22 hedge funds held shares or bullish call options in NEX a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in NexTier Oilfield Solutions Inc. (NYSE:NEX) was held by Cerberus Capital Management, which reported holding $145.8 million worth of stock at the end of September. It was followed by Pzena Investment Management with a $60.4 million position. Other investors bullish on the company included Fisher Asset Management, Glendon Capital Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Elm Ridge Capital allocated the biggest weight to NexTier Oilfield Solutions Inc. (NYSE:NEX), around 3.71% of its 13F portfolio. Covalent Capital Partners is also relatively very bullish on the stock, earmarking 2.66 percent of its 13F equity portfolio to NEX.

Judging by the fact that NexTier Oilfield Solutions Inc. (NYSE:NEX) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there exists a select few hedgies who were dropping their entire stakes heading into Q4. At the top of the heap, Matthew Hulsizer's PEAK6 Capital Management sold off the largest stake of the "upper crust" of funds watched by Insider Monkey, worth close to $0.4 million in stock, and Peter Muller's PDT Partners was right behind this move, as the fund cut about $0.3 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 3 funds heading into Q4.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as NexTier Oilfield Solutions Inc. (NYSE:NEX) but similarly valued. These stocks are Varex Imaging Corporation (NASDAQ:VREX), Hawaiian Holdings, Inc. (NASDAQ:HA), Central Securities Corporation (NYSE:CET), The Children's Place Inc. (NASDAQ:PLCE), AMTD International Inc. (NYSE:HKIB), Sarcos Technology and Robotics Corporation (NASDAQ:STRC), and Mechel PAO (NYSE:MTL). This group of stocks' market valuations resemble NEX's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VREX,21,143313,5 HA,13,50095,-3 CET,3,22964,0 PLCE,19,116605,-4 HKIB,1,5219,0 STRC,19,34891,19 MTL,8,12237,-1 Average,12,55046,2.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $263 million in NEX's case. Varex Imaging Corporation (NASDAQ:VREX) is the most popular stock in this table. On the other hand AMTD International Inc. (NYSE:HKIB) is the least popular one with only 1 bullish hedge fund positions. NexTier Oilfield Solutions Inc. (NYSE:NEX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NEX is 73.7. 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately NEX wasn't nearly as popular as these 5 stocks and hedge funds that were betting on NEX were disappointed as the stock returned -22.8% since the end of September (through 12/31) 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.