The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Exterran Corporation (NYSE:EXTN) from the perspective of those elite funds.
Is Exterran Corporation (NYSE:EXTN) worth your attention right now? Prominent investors are in an optimistic mood. The number of long hedge fund positions went up by 3 recently. Our calculations also showed that EXTN 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 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.
We’re going to review the key hedge fund action surrounding Exterran Corporation (NYSE:EXTN).
What does the smart money think about Exterran Corporation (NYSE:EXTN)?
At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards EXTN over the last 15 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Exterran Corporation (NYSE:EXTN) was held by Magnetar Capital, which reported holding $23.9 million worth of stock at the end of March. It was followed by Cannell Capital with a $15 million position. Other investors bullish on the company included Encompass Capital Advisors, D E Shaw, and Millennium Management.
As one would reasonably expect, specific money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, created the largest position in Exterran Corporation (NYSE:EXTN). Millennium Management had $4 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $0.4 million position during the quarter. The following funds were also among the new EXTN investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Benjamin A. Smith’s Laurion Capital Management.
Let’s now review hedge fund activity in other stocks similar to Exterran Corporation (NYSE:EXTN). These stocks are Partner Communications Company Ltd (NASDAQ:PTNR), NextDecade Corporation (NASDAQ:NEXT), Tuniu Corporation (NASDAQ:TOUR), and Myers Industries, Inc. (NYSE:MYE). This group of stocks’ market valuations resemble EXTN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PTNR | 2 | 10140 | 0 |
| NEXT | 7 | 422092 | -1 |
| TOUR | 5 | 33459 | 0 |
| MYE | 14 | 96913 | 6 |
| Average | 7 | 140651 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $141 million. That figure was $70 million in EXTN’s case. Myers Industries, Inc. (NYSE:MYE) is the most popular stock in this table. On the other hand Partner Communications Company Ltd (NASDAQ:PTNR) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Exterran Corporation (NYSE:EXTN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately EXTN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EXTN were disappointed as the stock returned -17.9% 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 in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
