Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Superior Energy Services, Inc. (NYSE:SPN) shareholders have witnessed a decrease in hedge fund sentiment lately. SPN was in 17 hedge funds’ portfolios at the end of the third quarter of 2018. There were 21 hedge funds in our database with SPN positions at the end of the previous quarter. Our calculations also showed that spn isn’t among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a glance at the recent hedge fund action encompassing Superior Energy Services, Inc. (NYSE:SPN).
How have hedgies been trading Superior Energy Services, Inc. (NYSE:SPN)?
Heading into the fourth quarter of 2018, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SPN over the last 13 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Superior Energy Services, Inc. (NYSE:SPN) was held by AQR Capital Management, which reported holding $41.4 million worth of stock at the end of September. It was followed by Millennium Management with a $30.6 million position. Other investors bullish on the company included Rima Senvest Management, Fine Capital Partners, and Pzena Investment Management.
Because Superior Energy Services, Inc. (NYSE:SPN) has experienced bearish sentiment from hedge fund managers, logic holds that there was a specific group of hedgies that elected to cut their positions entirely last quarter. At the top of the heap, Vince Maddi and Shawn Brennan’s SIR Capital Management said goodbye to the biggest position of all the hedgies followed by Insider Monkey, valued at close to $4.8 million in stock. Mariko Gordon’s fund, Daruma Asset Management, also sold off its stock, about $4.2 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 4 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Superior Energy Services, Inc. (NYSE:SPN) but similarly valued. These stocks are United Natural Foods, Inc. (NASDAQ:UNFI), WMIH Corp (NASDAQ:WMIH), Global Net Lease, Inc. (NYSE:GNL), and Grupo Simec S.A.B. de C.V. (NYSE:SIM). This group of stocks’ market caps resemble SPN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UNFI | 21 | 167872 | 4 |
| WMIH | 31 | 568490 | 13 |
| GNL | 3 | 17876 | -1 |
| SIM | 1 | 2175 | 0 |
| Average | 14 | 189103 | 4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $189 million. That figure was $186 million in SPN’s case. WMIH Corp (NASDAQ:WMIH) is the most popular stock in this table. On the other hand Grupo Simec S.A.B. de C.V. (NYSE:SIM) is the least popular one with only 1 bullish hedge fund positions. Superior Energy Services, Inc. (NYSE:SPN) 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 WMIH might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
