Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the fourth quarter. Among them, Amazon and Netflix ranked among the top 30 picks and both lost around 20%. Facebook, which was the second most popular stock, lost 14% amid uncertainty regarding the interest rates and tech valuations. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is Nabors Industries Ltd. (NYSE:NBR) a bargain? The best stock pickers are becoming hopeful. The number of bullish hedge fund positions moved up by 2 lately. Our calculations also showed that NBR isn’t among the 30 most popular stocks among hedge funds. NBR was in 39 hedge funds’ portfolios at the end of September. There were 37 hedge funds in our database with NBR positions at the end of the previous quarter.
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 18 percentage points since May 2014 through December 3, 2018 (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 view the new hedge fund action regarding Nabors Industries Ltd. (NYSE:NBR).
How have hedgies been trading Nabors Industries Ltd. (NYSE:NBR)?
At the end of the third quarter, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 33 hedge funds with a bullish position in NBR at the beginning of this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Balyasny Asset Management, managed by Dmitry Balyasny, holds the largest position in Nabors Industries Ltd. (NYSE:NBR). Balyasny Asset Management has a $103.6 million position in the stock, comprising 0.5% of its 13F portfolio. On Balyasny Asset Management’s heels is Leon Cooperman of Omega Advisors, with a $64.3 million position; the fund has 2.8% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism comprise Anand Parekh’s Alyeska Investment Group, Ken Griffin’s Citadel Investment Group and Todd J. Kantor’s Encompass Capital Advisors.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Encompass Capital Advisors, managed by Todd J. Kantor, established the biggest position in Nabors Industries Ltd. (NYSE:NBR). Encompass Capital Advisors had $23.8 million invested in the company at the end of the quarter. David Keidan’s Buckingham Capital Management also made a $6.2 million investment in the stock during the quarter. The following funds were also among the new NBR investors: Clint Carlson’s Carlson Capital, Joel Greenblatt’s Gotham Asset Management, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Nabors Industries Ltd. (NYSE:NBR) but similarly valued. We will take a look at Shutterfly, Inc. (NASDAQ:SFLY), Terreno Realty Corporation (NYSE:TRNO), Cadence Bancorporation (NYSE:CADE), and QTS Realty Trust Inc (NYSE:QTS). This group of stocks’ market valuations match NBR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SFLY | 23 | 550402 | -4 |
| TRNO | 12 | 62944 | 3 |
| CADE | 19 | 323041 | 3 |
| QTS | 19 | 393861 | 6 |
| Average | 18.25 | 332562 | 2 |
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 $333 million. That figure was $441 million in NBR’s case. Shutterfly, Inc. (NASDAQ:SFLY) is the most popular stock in this table. On the other hand Terreno Realty Corporation (NYSE:TRNO) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Nabors Industries Ltd. (NYSE:NBR) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
