We can judge whether Cactus, Inc. (NYSE:WHD) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, research shows that these picks historically outperformed the market when we factor in known risk factors.
Is Cactus, Inc. (NYSE:WHD) an exceptional investment today? Money managers are in a bullish mood. The number of long hedge fund bets inched up by 1 in recent months. Our calculations also showed that WHD isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
We’re going to take a glance at the key hedge fund action regarding Cactus, Inc. (NYSE:WHD).
How are hedge funds trading Cactus, Inc. (NYSE:WHD)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WHD over the last 13 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Millennium Management was the largest shareholder of Cactus, Inc. (NYSE:WHD), with a stake worth $64.1 million reported as of the end of September. Trailing Millennium Management was Brenham Capital Management, which amassed a stake valued at $31.6 million. Perella Weinberg Partners, Driehaus Capital, and Encompass Capital Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, specific money managers have jumped into Cactus, Inc. (NYSE:WHD) headfirst. Renaissance Technologies, managed by Jim Simons, established the most outsized position in Cactus, Inc. (NYSE:WHD). Renaissance Technologies had $7.6 million invested in the company at the end of the quarter. Ken Fisher’s Fisher Asset Management also initiated a $2.9 million position during the quarter. The following funds were also among the new WHD investors: David Costen Haley’s HBK Investments, Benjamin A. Smith’s Laurion Capital Management, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now review hedge fund activity in other stocks similar to Cactus, Inc. (NYSE:WHD). These stocks are Eaton Vance Tax-Managed Global Diversified Equity Income Fund (NYSE:EXG), National General Holdings Corp (NASDAQ:NGHC), Stag Industrial Inc (NYSE:STAG), and Bank of N.T. Butterfield & Son Limited (The) (NYSE:NTB). This group of stocks’ market valuations match WHD’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EXG | 2 | 536 | 1 |
| NGHC | 11 | 200585 | 2 |
| STAG | 11 | 70370 | 2 |
| NTB | 16 | 242622 | -1 |
| Average | 10 | 128528 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $129 million. That figure was $203 million in WHD’s case. Bank of N.T. Butterfield & Son Limited (The) (NYSE:NTB) is the most popular stock in this table. On the other hand Eaton Vance Tax-Managed Global Diversified Equity Income Fund (NYSE:EXG) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Cactus, Inc. (NYSE:WHD) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.