Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Patterson-UTI Energy, Inc. (NASDAQ:PTEN).
Is Patterson-UTI Energy, Inc. (NASDAQ:PTEN) ready to rally soon? The best stock pickers are becoming hopeful. The number of bullish hedge fund bets moved up by 1 lately. Our calculations also showed that PTEN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). PTEN was in 26 hedge funds’ portfolios at the end of the third quarter of 2019. There were 25 hedge funds in our database with PTEN positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most market participants, hedge funds are seen as underperforming, outdated investment vehicles of years past. While there are greater than 8000 funds with their doors open at present, We hone in on the top tier of this group, around 750 funds. These hedge fund managers manage the lion’s share of the smart money’s total capital, and by keeping track of their top equity investments, Insider Monkey has deciphered a few investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Cliff Asness of AQR Capital Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the fresh hedge fund action surrounding Patterson-UTI Energy, Inc. (NASDAQ:PTEN).
What does smart money think about Patterson-UTI Energy, Inc. (NASDAQ:PTEN)?
Heading into the fourth quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in PTEN over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Patterson-UTI Energy, Inc. (NASDAQ:PTEN), which was worth $84.1 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $38.9 million worth of shares. Millennium Management, Kahn Brothers, and Marshall Wace 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 3.56% of its portfolio. Kahn Brothers is also relatively very bullish on the stock, setting aside 2.9 percent of its 13F equity portfolio to PTEN.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into Patterson-UTI Energy, Inc. (NASDAQ:PTEN) headfirst. Arosa Capital Management, managed by Till Bechtolsheimer, assembled the biggest position in Patterson-UTI Energy, Inc. (NASDAQ:PTEN). Arosa Capital Management had $6 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also initiated a $3.9 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Bruce Kovner’s Caxton Associates, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
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. These stocks are Walker & Dunlop Inc. (NYSE:WD), Installed Building Products Inc (NYSE:IBP), Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH), and CSG Systems International, Inc. (NASDAQ:CSGS). This group of stocks’ market values match PTEN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WD | 15 | 72221 | 0 |
| IBP | 20 | 189032 | 7 |
| DCPH | 26 | 542998 | 11 |
| CSGS | 19 | 221276 | 1 |
| Average | 20 | 256382 | 4.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $256 million. That figure was $251 million in PTEN’s case. Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH) is the most popular stock in this table. On the other hand Walker & Dunlop Inc. (NYSE:WD) is the least popular one with only 15 bullish hedge fund positions. Patterson-UTI Energy, Inc. (NASDAQ:PTEN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 PTEN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PTEN were disappointed as the stock returned 4.6% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
