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Is SOI A Good Stock To Buy Now?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 817 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of September 30th, about a month before the elections. In this article we look at what those investors think of Solaris Oilfield Infrastructure, Inc. (NYSE:SOI).

Is SOI a good stock to buy now? Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) has seen a decrease in hedge fund sentiment lately. Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) was in 14 hedge funds' portfolios at the end of September. The all time high for this statistic is 18. There were 17 hedge funds in our database with SOI positions at the end of the second quarter. Our calculations also showed that SOI isn't among the 30 most popular stocks among hedge funds (click for Q3 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 66 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.

David Harding
David Harding

David Harding of Winton Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let's take a gander at the latest hedge fund action regarding Solaris Oilfield Infrastructure, Inc. (NYSE:SOI).

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

At third quarter's end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards SOI over the last 21 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SOI A Good Stock To Buy?
Is SOI A Good Stock To Buy?

According to Insider Monkey's hedge fund database, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the largest position in Solaris Oilfield Infrastructure, Inc. (NYSE:SOI). Adage Capital Management has a $9.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Encompass Capital Advisors, managed by Todd J. Kantor, which holds a $7.5 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions encompass Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Paul Marshall and Ian Wace's Marshall Wace LLP and David Harding's Winton Capital Management. In terms of the portfolio weights assigned to each position Encompass Capital Advisors allocated the biggest weight to Solaris Oilfield Infrastructure, Inc. (NYSE:SOI), around 0.67% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, dishing out 0.11 percent of its 13F equity portfolio to SOI.

Since Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) has experienced bearish sentiment from the smart money, logic holds that there is a sect of funds who were dropping their positions entirely heading into Q4. Interestingly, Vince Maddi and Shawn Brennan's SIR Capital Management cut the largest investment of the 750 funds monitored by Insider Monkey, valued at an estimated $1.3 million in stock, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors was right behind this move, as the fund said goodbye to about $0.2 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 now review hedge fund activity in other stocks - not necessarily in the same industry as Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) but similarly valued. These stocks are Cassava Sciences, Inc. (NASDAQ:SAVA), DXP Enterprises Inc (NASDAQ:DXPE), Funko, Inc. (NASDAQ:FNKO), Peapack-Gladstone Financial Corp (NASDAQ:PGC), Affimed NV (NASDAQ:AFMD), Aldeyra Therapeutics Inc (NASDAQ:ALDX), and Orphazyme A/S (NASDAQ:ORPH). This group of stocks' market valuations are similar to SOI's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SAVA,8,8159,6 DXPE,10,29362,2 FNKO,8,17454,1 PGC,16,33214,-1 AFMD,16,60539,2 ALDX,17,102739,-2 ORPH,5,20668,5 Average,11.4,38876,1.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.4 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $25 million in SOI's case. Aldeyra Therapeutics Inc (NASDAQ:ALDX) is the most popular stock in this table. On the other hand Orphazyme A/S (NASDAQ:ORPH) is the least popular one with only 5 bullish hedge fund positions. Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SOI is 62.8. 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. 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 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on SOI as the stock returned 31.3% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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