A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended March 31, so let’s proceed with the discussion of the hedge fund sentiment on Nine Energy Service, Inc. (NYSE:NINE).
Hedge fund interest in Nine Energy Service, Inc. (NYSE:NINE) 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 United Insurance Holdings Corp.(NDA) (NASDAQ:UIHC), Fossil Group Inc (NASDAQ:FOSL), and Sabine Royalty Trust (NYSE:SBR) to gather more data points.
Why do we pay any attention at all to hedge fund sentiment? 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 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a look at the recent hedge fund action regarding Nine Energy Service, Inc. (NYSE:NINE).
What have hedge funds been doing with Nine Energy Service, Inc. (NYSE:NINE)?
At Q1’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in NINE over the last 15 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the most valuable position in Nine Energy Service, Inc. (NYSE:NINE). Adage Capital Management has a $20.5 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Encompass Capital Advisors, managed by Todd J. Kantor, which holds a $13.7 million position; the fund has 1% of its 13F portfolio invested in the stock. Remaining peers with similar optimism consist of Richard Driehaus’s Driehaus Capital, Jim Simons’s Renaissance Technologies and Arvind Sanger’s GeoSphere Capital Management.
Judging by the fact that Nine Energy Service, Inc. (NYSE:NINE) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there was a specific group of money managers that elected to cut their positions entirely in the third quarter. It’s worth mentioning that D. E. Shaw’s D E Shaw cut the biggest stake of all the hedgies followed by Insider Monkey, worth about $1.3 million in stock. Ken Griffin’s fund, Citadel Investment Group, also dumped its stock, about $0.2 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Nine Energy Service, Inc. (NYSE:NINE) but similarly valued. These stocks are United Insurance Holdings Corp. (NASDAQ:UIHC), Fossil Group Inc (NASDAQ:FOSL), Sabine Royalty Trust (NYSE:SBR), and Rayonier Advanced Materials Inc (NYSE:RYAM). This group of stocks’ market values are similar to NINE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UIHC | 7 | 8100 | 1 |
| FOSL | 17 | 80499 | -1 |
| SBR | 6 | 24252 | 0 |
| RYAM | 24 | 142317 | 5 |
| Average | 13.5 | 63792 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $43 million in NINE’s case. Rayonier Advanced Materials Inc (NYSE:RYAM) is the most popular stock in this table. On the other hand Sabine Royalty Trust (NYSE:SBR) is the least popular one with only 6 bullish hedge fund positions. Nine Energy Service, Inc. (NYSE:NINE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately NINE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NINE investors were disappointed as the stock returned -23.8% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
