We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Nabors Industries Ltd. (NYSE:NBR).
Is Nabors Industries Ltd. (NYSE:NBR) a cheap investment now? Prominent investors are getting less bullish. The number of long hedge fund positions decreased by 2 lately. Our calculations also showed that NBR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Leon Cooperman of Omega Advisors
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the fresh hedge fund action encompassing Nabors Industries Ltd. (NYSE:NBR).
How are hedge funds trading Nabors Industries Ltd. (NYSE:NBR)?
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the second quarter of 2019. On the other hand, there were a total of 39 hedge funds with a bullish position in NBR a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Omega Advisors held the most valuable stake in Nabors Industries Ltd. (NYSE:NBR), which was worth $27.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $21.8 million worth of shares. AQR Capital Management, LMR Partners, and Lonestar Capital Management 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 Elm Ridge Capital allocated the biggest weight to Nabors Industries Ltd. (NYSE:NBR), around 1.71% of its 13F portfolio. Omega Advisors is also relatively very bullish on the stock, setting aside 1.64 percent of its 13F equity portfolio to NBR.
Since Nabors Industries Ltd. (NYSE:NBR) has experienced declining sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of fund managers who were dropping their positions entirely by the end of the third quarter. Intriguingly, David Keidan’s Buckingham Capital Management said goodbye to the largest investment of all the hedgies tracked by Insider Monkey, valued at close to $4.2 million in stock. Andy Redleaf’s fund, Whitebox Advisors, also dumped its stock, about $2.8 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 2 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to Nabors Industries Ltd. (NYSE:NBR). We will take a look at Golar LNG Partners LP (NASDAQ:GMLP), Allegiance Bancshares, Inc. (NASDAQ:ABTX), LeMaitre Vascular Inc (NASDAQ:LMAT), and Principia Biopharma Inc. (NASDAQ:PRNB). All of these stocks’ market caps are similar to NBR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GMLP | 4 | 36061 | -2 |
| ABTX | 8 | 18893 | 2 |
| LMAT | 10 | 12279 | -1 |
| PRNB | 12 | 196940 | 0 |
| Average | 8.5 | 66043 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $90 million in NBR’s case. Principia Biopharma Inc. (NASDAQ:PRNB) is the most popular stock in this table. On the other hand Golar LNG Partners LP (NASDAQ:GMLP) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Nabors Industries Ltd. (NYSE:NBR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on NBR, though not to the same extent, as the stock returned 10.2% during the fourth quarter (through the end of November) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
