The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May as this time China pivoted and Trump put more pressure on China by increasing tariffs. Hedge funds’ top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 18.7% through May 30th, vs. a gain of 12.1% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards Sentinel Energy Services Inc. (NASDAQ:STNL), and what that likely means for the prospects of the company and its stock.
Sentinel Energy Services Inc. (NASDAQ:STNL) investors should pay attention to a decrease in enthusiasm from smart money lately. Our calculations also showed that STNL isn’t among the 30 most popular stocks among hedge funds.
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 fresh hedge fund action regarding Sentinel Energy Services Inc. (NASDAQ:STNL).
How are hedge funds trading Sentinel Energy Services Inc. (NASDAQ:STNL)?
Heading into the second quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in STNL over the last 15 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Sentinel Energy Services Inc. (NASDAQ:STNL) was held by Glazer Capital, which reported holding $25.8 million worth of stock at the end of March. It was followed by Governors Lane with a $22.3 million position. Other investors bullish on the company included Weiss Asset Management, BlueCrest Capital Mgmt., and Angelo Gordon & Co.
Due to the fact that Sentinel Energy Services Inc. (NASDAQ:STNL) has faced a decline in interest from hedge fund managers, logic holds that there was a specific group of funds that elected to cut their full holdings heading into Q3. It’s worth mentioning that Seth Klarman’s Baupost Group cut the biggest position of all the hedgies watched by Insider Monkey, comprising close to $16.5 million in stock, and Sander Gerber’s Hudson Bay Capital Management was right behind this move, as the fund dropped about $6.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds heading into Q3.
Let’s go over hedge fund activity in other stocks similar to Sentinel Energy Services Inc. (NASDAQ:STNL). We will take a look at Community Health Systems, Inc. (NYSE:CYH), CAI International Inc (NYSE:CAI), Senseonics Holdings, Inc. (NYSE:SENS), and Silvercorp Metals Inc. (NYSE:SVM). This group of stocks’ market valuations are similar to STNL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CYH | 18 | 51979 | -8 |
| CAI | 16 | 112720 | -1 |
| SENS | 10 | 5479 | -4 |
| SVM | 9 | 17911 | -3 |
| Average | 13.25 | 47022 | -4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $161 million in STNL’s case. Community Health Systems, Inc. (NYSE:CYH) is the most popular stock in this table. On the other hand Silvercorp Metals Inc. (NYSE:SVM) is the least popular one with only 9 bullish hedge fund positions. Sentinel Energy Services Inc. (NASDAQ:STNL) 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. 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 STNL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on STNL were disappointed as the stock returned 1.1% during the same 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.
