At the end of February we announced the arrival of the first US recession since 2009 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 Ranger Energy Services, Inc. (NYSE:RNGR).
Hedge fund interest in Ranger Energy Services, Inc. (NYSE:RNGR) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Amtech Systems, Inc. (NASDAQ:ASYS), Veritone, Inc. (NASDAQ:VERI), and Pro-Dex, Inc. (NASDAQ:PDEX) to gather more data points. Our calculations also showed that RNGR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 44 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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_193003" align="aligncenter" width="399"] Chuck Royce of Royce & Associates[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital's Michael Castor expects to double. 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. With all of this in mind let's take a look at the fresh hedge fund action surrounding Ranger Energy Services, Inc. (NYSE:RNGR).
Hedge fund activity in Ranger Energy Services, Inc. (NYSE:RNGR)
At Q1's end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in RNGR over the last 18 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in Ranger Energy Services, Inc. (NYSE:RNGR), which was worth $2.7 million at the end of the third quarter. On the second spot was Millennium Management which amassed $0.1 million worth of shares. Renaissance Technologies was 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 Royce & Associates allocated the biggest weight to Ranger Energy Services, Inc. (NYSE:RNGR), around 0.04% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, dishing out 0.0003 percent of its 13F equity portfolio to RNGR.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Ranger Energy Services, Inc. (NYSE:RNGR) but similarly valued. We will take a look at Amtech Systems, Inc. (NASDAQ:ASYS), Veritone, Inc. (NASDAQ:VERI), Pro-Dex, Inc. (NASDAQ:PDEX), and Tottenham Acquisition I Limited (NASDAQ:TOTA). This group of stocks' market caps match RNGR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ASYS,7,8053,1 VERI,2,155,0 PDEX,2,625,0 TOTA,5,7256,-1 Average,4,4022,0 [/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 $4 million. That figure was $3 million in RNGR's case. Amtech Systems, Inc. (NASDAQ:ASYS) is the most popular stock in this table. On the other hand Veritone, Inc. (NASDAQ:VERI) is the least popular one with only 2 bullish hedge fund positions. Ranger Energy Services, Inc. (NYSE:RNGR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and surpassed the market by 15.6 percentage points. Unfortunately RNGR wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); RNGR investors were disappointed as the stock returned -8.1% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.