How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Liberty Oilfield Services Inc. (NYSE:LBRT).
Is Liberty Oilfield Services (LBRT) a good stock to buy now? The smart money was buying. The number of long hedge fund positions moved up by 1 in recent months. Liberty Oilfield Services Inc. (NYSE:LBRT) was in 7 hedge funds’ portfolios at the end of September. The all time high for this statistics is 16. Our calculations also showed that LBRT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 6 hedge funds in our database with LBRT positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are tons of signals stock market investors put to use to grade their holdings. A couple of the most useful signals are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the top fund managers can outperform the market by a superb margin (see the details here).
Thomas Claugus of GMT Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to take a glance at the recent hedge fund action surrounding Liberty Oilfield Services Inc. (NYSE:LBRT).
Hedge fund activity in Liberty Oilfield Services Inc. (NYSE:LBRT)
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LBRT over the last 21 quarters. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, GMT Capital was the largest shareholder of Liberty Oilfield Services Inc. (NYSE:LBRT), with a stake worth $3.6 million reported as of the end of September. Trailing GMT Capital was Arrowstreet Capital, which amassed a stake valued at $2 million. Winton Capital Management, Arosa Capital Management, and Paloma Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position GMT Capital allocated the biggest weight to Liberty Oilfield Services Inc. (NYSE:LBRT), around 0.26% of its 13F portfolio. Arosa Capital Management is also relatively very bullish on the stock, designating 0.12 percent of its 13F equity portfolio to LBRT.
As one would reasonably expect, key hedge funds have been driving this bullishness. Arosa Capital Management, managed by Till Bechtolsheimer, assembled the most outsized position in Liberty Oilfield Services Inc. (NYSE:LBRT). Arosa Capital Management had $0.8 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $0.3 million position during the quarter. The other funds with new positions in the stock are Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital) and Peter Algert’s Algert Global.
Let’s now take a look at hedge fund activity in other stocks similar to Liberty Oilfield Services Inc. (NYSE:LBRT). We will take a look at Chase Corporation (NYSE:CCF), Huron Consulting Group Inc. (NASDAQ:HURN), Fanhua Inc. (NASDAQ:FANH), OrthoPediatrics Corp. (NASDAQ:KIDS), Systemax Inc. (NYSE:SYX), Fulgent Genetics, Inc. (NASDAQ:FLGT), and Dine Brands Global, Inc. (NYSE:DIN). This group of stocks’ market values are similar to LBRT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CCF | 11 | 82044 | -1 |
| HURN | 12 | 30791 | 1 |
| FANH | 5 | 5514 | 1 |
| KIDS | 12 | 69579 | -1 |
| SYX | 15 | 29792 | 4 |
| FLGT | 6 | 32654 | 3 |
| DIN | 25 | 150078 | 0 |
| Average | 12.3 | 57207 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.3 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $8 million in LBRT’s case. Dine Brands Global, Inc. (NYSE:DIN) is the most popular stock in this table. On the other hand Fanhua Inc. (NASDAQ:FANH) is the least popular one with only 5 bullish hedge fund positions. Liberty Oilfield Services Inc. (NYSE:LBRT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LBRT is 24.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on LBRT as the stock returned 27.8% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
