We at Insider Monkey have gone over 752 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article, we look at what those funds think of Flotek Industries Inc (NYSE:FTK) based on that data.
Hedge fund interest in Flotek Industries Inc (NYSE:FTK) 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 RADCOM Ltd. (NASDAQ:RDCM), Citizens Community Bancorp Inc. (NASDAQ:CZWI), and Travelzoo Inc. (NASDAQ:TZOO) to gather more data points. Our calculations also showed that FTK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David E. Shaw of D.E. Shaw
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s go over the fresh hedge fund action encompassing Flotek Industries Inc (NYSE:FTK).
What does smart money think about Flotek Industries Inc (NYSE:FTK)?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. On the other hand, there were a total of 11 hedge funds with a bullish position in FTK a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Peter Schliemann’s Rutabaga Capital Management has the most valuable position in Flotek Industries Inc (NYSE:FTK), worth close to $4.3 million, comprising 1.5% of its total 13F portfolio. Sitting at the No. 2 spot is Fondren Management, managed by Bradley Louis Radoff, which holds a $4.1 million position; the fund has 3.4% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions encompass David E. Shaw’s D E Shaw, Noah Levy and Eugene Dozortsev’s Newtyn Management and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Fondren Management allocated the biggest weight to Flotek Industries Inc (NYSE:FTK), around 3.45% of its 13F portfolio. Rutabaga Capital Management is also relatively very bullish on the stock, setting aside 1.53 percent of its 13F equity portfolio to FTK.
Because Flotek Industries Inc (NYSE:FTK) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there were a few money managers that decided to sell off their positions entirely by the end of the third quarter. At the top of the heap, Matthew Drapkin and Steven R. Becker’s Becker Drapkin Management dumped the biggest position of all the hedgies monitored by Insider Monkey, worth about $2.8 million in stock, and William Harnisch’s Peconic Partners was right behind this move, as the fund cut about $0.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to Flotek Industries Inc (NYSE:FTK). We will take a look at RADCOM Ltd. (NASDAQ:RDCM), Citizens Community Bancorp Inc. (NASDAQ:CZWI), Travelzoo Inc. (NASDAQ:TZOO), and Ovid Therapeutics Inc. (NASDAQ:OVID). This group of stocks’ market values resemble FTK’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RDCM | 4 | 14881 | 0 |
| CZWI | 4 | 8408 | 1 |
| TZOO | 9 | 16544 | 0 |
| OVID | 9 | 12627 | 3 |
| Average | 6.5 | 13115 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $18 million in FTK’s case. Travelzoo Inc. (NASDAQ:TZOO) is the most popular stock in this table. On the other hand RADCOM Ltd. (NASDAQ:RDCM) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Flotek Industries Inc (NYSE:FTK) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately FTK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FTK were disappointed as the stock returned -19.5% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
