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Patterson-UTI Energy, Inc. (PTEN): Are Hedge Funds Right About This Stock?

Debasis Saha
·5 mins read

Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Patterson-UTI Energy, Inc. (NASDAQ:PTEN).

Patterson-UTI Energy, Inc. (NASDAQ:PTEN) was in 29 hedge funds' portfolios at the end of December. PTEN shareholders have witnessed an increase in support from the world's most elite money managers in recent months. There were 27 hedge funds in our database with PTEN positions at the end of the previous quarter. Our calculations also showed that PTEN isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Irving Kahn
Irving Kahn

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind we're going to check out the recent hedge fund action regarding Patterson-UTI Energy, Inc. (NASDAQ:PTEN).

What have hedge funds been doing with Patterson-UTI Energy, Inc. (NASDAQ:PTEN)?

At the end of the fourth quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. On the other hand, there were a total of 39 hedge funds with a bullish position in PTEN a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is PTEN A Good Stock To Buy?
Is PTEN A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of Patterson-UTI Energy, Inc. (NASDAQ:PTEN), with a stake worth $120.4 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $50.7 million. Kahn Brothers, Point72 Asset Management, and Two Sigma Advisors 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 Elm Ridge Capital allocated the biggest weight to Patterson-UTI Energy, Inc. (NASDAQ:PTEN), around 4.18% of its 13F portfolio. Kahn Brothers is also relatively very bullish on the stock, designating 3.3 percent of its 13F equity portfolio to PTEN.

With a general bullishness amongst the heavyweights, some big names have jumped into Patterson-UTI Energy, Inc. (NASDAQ:PTEN) headfirst. Point72 Asset Management, managed by Steve Cohen, established the most outsized position in Patterson-UTI Energy, Inc. (NASDAQ:PTEN). Point72 Asset Management had $15.7 million invested in the company at the end of the quarter. Minhua Zhang's Weld Capital Management also initiated a $1.4 million position during the quarter. The other funds with brand new PTEN positions are Paul Tudor Jones's Tudor Investment Corp, David Harding's Winton Capital Management, and Mika Toikka's AlphaCrest Capital Management.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Patterson-UTI Energy, Inc. (NASDAQ:PTEN) but similarly valued. We will take a look at Prestige Brands Holdings, Inc. (NYSE:PBH), Myriad Genetics, Inc. (NASDAQ:MYGN), Ambarella Inc (NASDAQ:AMBA), and Renasant Corporation (NASDAQ:RNST). This group of stocks' market caps are similar to PTEN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PBH,14,100030,-4 MYGN,15,237000,2 AMBA,26,206071,-4 RNST,12,70374,3 Average,16.75,153369,-0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $153 million. That figure was $296 million in PTEN's case. Ambarella Inc (NASDAQ:AMBA) is the most popular stock in this table. On the other hand Renasant Corporation (NASDAQ:RNST) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Patterson-UTI Energy, Inc. (NASDAQ:PTEN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th and still beat the market by 4.2 percentage points. Unfortunately PTEN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on PTEN were disappointed as the stock returned -81.5% during the three months of 2020 (through April 6th) 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 most of these stocks already outperformed the market in 2020. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

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

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