With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Oil States International, Inc. (NYSE:OIS).
Is Oil States International, Inc. (NYSE:OIS) the right pick for your portfolio? Prominent investors are buying. The number of long hedge fund bets inched up by 4 recently. Our calculations also showed that OIS 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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let’s review the new hedge fund action encompassing Oil States International, Inc. (NYSE:OIS).
Hedge fund activity in Oil States International, Inc. (NYSE:OIS)
Heading into the second quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 40% from the fourth quarter of 2018. By comparison, 9 hedge funds held shares or bullish call options in OIS a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Oil States International, Inc. (NYSE:OIS), with a stake worth $7.1 million reported as of the end of March. Trailing Citadel Investment Group was Renaissance Technologies, which amassed a stake valued at $6.8 million. Royce & Associates, Millennium Management, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, specific money managers were leading the bulls’ herd. Millennium Management, managed by Israel Englander, created the largest position in Oil States International, Inc. (NYSE:OIS). Millennium Management had $4.4 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $2.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, D. E. Shaw’s D E Shaw, and Mike Vranos’s Ellington.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Oil States International, Inc. (NYSE:OIS) but similarly valued. We will take a look at National Bank Holdings Corp (NYSE:NBHC), C&J Energy Services, Inc (NYSE:CJ), Multi-Color Corporation (NASDAQ:LABL), and Revlon Inc (NYSE:REV). This group of stocks’ market caps match OIS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NBHC | 8 | 78221 | -2 |
| CJ | 25 | 234976 | 0 |
| LABL | 12 | 67813 | 2 |
| REV | 28 | 267692 | 2 |
| Average | 18.25 | 162176 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $162 million. That figure was $34 million in OIS’s case. Revlon Inc (NYSE:REV) is the most popular stock in this table. On the other hand National Bank Holdings Corp (NYSE:NBHC) is the least popular one with only 8 bullish hedge fund positions. Oil States International, Inc. (NYSE:OIS) 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 OIS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); OIS investors were disappointed as the stock returned 1.8% 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.
