Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The one and a half month time period since the end of the third quarter is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by about 4 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of C&J Energy Services, Inc (NYSE:CJ).
C&J Energy Services, Inc (NYSE:CJ) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 25 hedge funds’ portfolios at the end of the third quarter of 2018. 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 Cooper Tire & Rubber Company (NYSE:CTB), Golden Ocean Group Ltd (NASDAQ:GOGL), and ICF International Inc (NASDAQ:ICFI) to gather more data points.
In the eyes of most shareholders, hedge funds are perceived as underperforming, old investment tools of years past. While there are more than 8,000 funds with their doors open at the moment, Our experts choose to focus on the crème de la crème of this club, about 700 funds. Most estimates calculate that this group of people command bulk of the smart money’s total capital, and by tracking their finest investments, Insider Monkey has come up with many investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship hedge fund strategy outstripped the S&P 500 index by 6 percentage points per year 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 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.
Let’s take a peek at the key hedge fund action encompassing C&J Energy Services, Inc (NYSE:CJ).
What does the smart money think about C&J Energy Services, Inc (NYSE:CJ)?
At Q3’s end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, no change from one quarter earlier. On the other hand, there were a total of 36 hedge funds with a bullish position in CJ at the beginning of this year. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, Solus Alternative Asset Management was the largest shareholder of C&J Energy Services, Inc (NYSE:CJ), with a stake worth $124.8 million reported as of the end of September. Trailing Solus Alternative Asset Management was Point72 Asset Management, which amassed a stake valued at $86 million. Millennium Management, Glendon Capital Management, and Whitebox Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as C&J Energy Services, Inc (NYSE:CJ) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there were a few funds that elected to cut their full holdings heading into Q3. Interestingly, Alec Litowitz and Ross Laser’s Magnetar Capital cut the largest position of the 700 funds watched by Insider Monkey, totaling about $33.1 million in stock. Clint Carlson’s fund, Carlson Capital, also dumped its stock, about $4 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as C&J Energy Services, Inc (NYSE:CJ) but similarly valued. We will take a look at Cooper Tire & Rubber Company (NYSE:CTB), Golden Ocean Group Ltd (NASDAQ:GOGL), ICF International Inc (NASDAQ:ICFI), and NGL Energy Partners LP (NYSE:NGL). All of these stocks’ market caps match CJ’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CTB | 10 | 140599 | -2 |
| GOGL | 6 | 200094 | -1 |
| ICFI | 16 | 51615 | 4 |
| NGL | 5 | 9108 | -1 |
| Average | 9.25 | 100354 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $452 million in CJ’s case. ICF International Inc (NASDAQ:ICFI) is the most popular stock in this table. On the other hand NGL Energy Partners LP (NYSE:NGL) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks C&J Energy Services, Inc (NYSE:CJ) 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.
