The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Sentinel Energy Services Inc. (NASDAQ:STNL) from the perspective of those elite funds.
Is Sentinel Energy Services Inc. (NASDAQ:STNL) going to take off soon? Investors who are in the know are taking an optimistic view. The number of long hedge fund bets moved up by 1 in recent months. Our calculations also showed that STNL isn’t among the 30 most popular stocks among hedge funds. STNL was in 16 hedge funds’ portfolios at the end of December. There were 15 hedge funds in our database with STNL positions at the end of the previous quarter.
If you’d ask most stock holders, hedge funds are viewed as unimportant, old financial tools of the past. While there are more than 8000 funds in operation today, We choose to focus on the top tier of this group, around 750 funds. It is estimated that this group of investors administer bulk of all hedge funds’ total asset base, and by keeping track of their finest picks, Insider Monkey has determined a number of investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship hedge fund strategy surpassed the S&P 500 index by nearly 5 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
Let’s analyze the key hedge fund action surrounding Sentinel Energy Services Inc. (NASDAQ:STNL).
How are hedge funds trading Sentinel Energy Services Inc. (NASDAQ:STNL)?
Heading into the first quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards STNL over the last 14 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Governors Lane was the largest shareholder of Sentinel Energy Services Inc. (NASDAQ:STNL), with a stake worth $22.2 million reported as of the end of December. Trailing Governors Lane was Baupost Group, which amassed a stake valued at $16.5 million. Angelo Gordon & Co, Adage Capital Management, and BlueCrest Capital Mgmt. were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. Governors Lane, managed by Isaac Corre, assembled the most valuable position in Sentinel Energy Services Inc. (NASDAQ:STNL). Governors Lane had $22.2 million invested in the company at the end of the quarter. Seth Klarman’s Baupost Group also initiated a $16.5 million position during the quarter. The other funds with brand new STNL positions are John M. Angelo and Michael L. Gordon’s Angelo Gordon & Co, Phill Gross and Robert Atchinson’s Adage Capital Management, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..
Let’s also examine hedge fund activity in other stocks similar to Sentinel Energy Services Inc. (NASDAQ:STNL). We will take a look at Green Plains Partners LP (NASDAQ:GPP), Tejon Ranch Company (NYSE:TRC), REX American Resources Corp (NYSE:REX), and Flexion Therapeutics Inc (NASDAQ:FLXN). This group of stocks’ market values are similar to STNL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GPP | 2 | 28658 | -1 |
| TRC | 12 | 80077 | 2 |
| REX | 7 | 37319 | 1 |
| FLXN | 14 | 51371 | -1 |
| Average | 8.75 | 49356 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $166 million in STNL’s case. Flexion Therapeutics Inc (NASDAQ:FLXN) is the most popular stock in this table. On the other hand Green Plains Partners LP (NASDAQ:GPP) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Sentinel Energy Services Inc. (NASDAQ:STNL) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately STNL wasn’t nearly as popular as these 15 stock and hedge funds that were betting on STNL were disappointed as the stock returned 0.7% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
