Here is What Hedge Funds Think About National-Oilwell Varco, Inc. (NOV)

Between June 25 and October 30th the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of National-Oilwell Varco, Inc. (NYSE:NOV) and see how the stock is affected by the recent hedge fund activity.

Hedge fund interest in National-Oilwell Varco, Inc. (NYSE:NOV) 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 DTE Energy Co (NYSE:DTE), Republic Services, Inc. (NYSE:RSG), and Coca-Cola FEMSA, S.A.B. de C.V. (ADR) (NYSE:KOF) to gather more data points.

If you’d ask most investors, hedge funds are perceived as worthless, outdated investment tools of the past. While there are more than 8000 funds in operation at the moment, We choose to focus on the masters of this group, approximately 700 funds. It is estimated that this group of investors preside over the lion’s share of all hedge funds’ total asset base, and by tailing their inimitable investments, Insider Monkey has formulated a few investment strategies that have historically exceeded Mr. Market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Now, we’re going to analyze the recent action regarding National-Oilwell Varco, Inc. (NYSE:NOV).

What does the smart money think about National-Oilwell Varco, Inc. (NYSE:NOV)?

Heading into Q4, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the previous quarter. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Southeastern Asset Management, managed by Mason Hawkins, holds the number one position in National-Oilwell Varco, Inc. (NYSE:NOV). Southeastern Asset Management has a $131.6 million position in the stock, comprising 1.1% of its 13F portfolio. The second most bullish fund manager is Larry Robbins of Glenview Capital, with a $78.3 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish comprise Bruce Berkowitz’s Fairholme (FAIRX), Cliff Asness’ AQR Capital Management and Tom Gayner’s Markel Gayner Asset Management.

Seeing as National-Oilwell Varco, Inc. (NYSE:NOV) has witnessed a declination in interest from the smart money, we can see that there exists a select few hedge funds who were dropping their full holdings last quarter. Intriguingly, Ken Griffin’s Citadel Investment Group cut the largest stake of the 700 funds followed by Insider Monkey, totaling about $3.3 million in stock. Ray Dalio’s fund, Bridgewater Associates, also sold off its stock, about $2.7 million worth. These bearish behaviors are interesting, 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 National-Oilwell Varco, Inc. (NYSE:NOV). These stocks are DTE Energy Co (NYSE:DTE), Republic Services, Inc. (NYSE:RSG), Coca-Cola FEMSA, S.A.B. de C.V. (ADR) (NYSE:KOF), and Hess Corp. (NYSE:HES). This group of stocks’ market values resemble NOV’s market value.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $748 million. That figure was $1.35 billion in NOV’s case. Hess Corp. (NYSE:HES) is the most popular stock in this table, while Coca-Cola FEMSA, S.A.B. de C.V. (ADR) (NYSE:KOF) is the least popular one with only 11 bullish hedge fund positions. National-Oilwell Varco, Inc. (NYSE:NOV) 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. In this regard HES might be a better candidate to consider a long position.