Reputable billionaire investors such as Jim Simons, Cliff Asness 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.
Is Weatherford International plc (NYSE:WFT) ready to rally soon? Investors who are in the know are turning bullish. The number of bullish hedge fund bets advanced by 1 in recent months. Our calculations also showed that wft isn’t among the 30 most popular stocks among hedge funds. WFT was in 22 hedge funds’ portfolios at the end of December. There were 21 hedge funds in our database with WFT positions at the end of the previous quarter.
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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a gander at the new hedge fund action surrounding Weatherford International plc (NYSE:WFT).
What have hedge funds been doing with Weatherford International plc (NYSE:WFT)?
At Q4’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WFT over the last 14 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, Perella Weinberg Partners was the largest shareholder of Weatherford International plc (NYSE:WFT), with a stake worth $19.3 million reported as of the end of December. Trailing Perella Weinberg Partners was Nokota Management, which amassed a stake valued at $18.8 million. Prescott Group Capital Management, Citadel Investment Group, and Q Investments (Specter Holdings) were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, specific money managers were leading the bulls’ herd. Redwood Capital Management, managed by Jonathan Kolatch, created the largest position in Weatherford International plc (NYSE:WFT). Redwood Capital Management had $29.3 million invested in the company at the end of the quarter. Kevin Michael Ulrich and Anthony Davis’s Anchorage Advisors also initiated a $22.4 million position during the quarter. The other funds with new positions in the stock are Andy Redleaf’s Whitebox Advisors, Mark T. Gallogly’s Centerbridge Partners, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.
Let’s also examine hedge fund activity in other stocks similar to Weatherford International plc (NYSE:WFT). We will take a look at Global Brass and Copper Holdings Inc (NYSE:BRSS), Equity Bancshares, Inc. (NASDAQ:EQBK), BBX Capital Corporation (NYSE:BBX), and SunCoke Energy, Inc (NYSE:SXC). This group of stocks’ market caps match WFT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BRSS | 15 | 53276 | -2 |
| EQBK | 7 | 55617 | 0 |
| BBX | 15 | 43502 | 0 |
| SXC | 17 | 86878 | -4 |
| Average | 13.5 | 59818 | -1.5 |
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 $60 million. That figure was $79 million in WFT’s case. SunCoke Energy, Inc (NYSE:SXC) is the most popular stock in this table. On the other hand Equity Bancshares, Inc. (NASDAQ:EQBK) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Weatherford International plc (NYSE:WFT) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately WFT wasn’t nearly as popular as these 15 stock and hedge funds that were betting on WFT were disappointed as the stock returned 8.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
