It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 8 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Mammoth Energy Services, Inc. (NASDAQ:TUSK).
Mammoth Energy Services, Inc. (NASDAQ:TUSK) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 9 hedge funds’ portfolios at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Garrison Capital Inc (NASDAQ:GARS), BioXcel Therapeutics, Inc. (NASDAQ:BTAI), and HMN Financial, Inc. (NASDAQ:HMNF) to gather more data points. Our calculations also showed that TUSK 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.
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 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.
Charles Davidson of Wexford Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s view the new hedge fund action surrounding Mammoth Energy Services, Inc. (NASDAQ:TUSK).
How are hedge funds trading Mammoth Energy Services, Inc. (NASDAQ:TUSK)?
Heading into the fourth quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in TUSK over the last 17 quarters. 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 Insider Monkey’s hedge fund database, Wexford Capital, managed by Charles Davidson and Joseph Jacobs, holds the number one position in Mammoth Energy Services, Inc. (NASDAQ:TUSK). Wexford Capital has a $54.5 million position in the stock, comprising 7.6% of its 13F portfolio. On Wexford Capital’s heels is David E. Shaw of D E Shaw, with a $0.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers that hold long positions contain David Harding’s Winton Capital Management, John Overdeck and David Siegel’s Two Sigma Advisors and Philip Hempleman’s Ardsley Partners. In terms of the portfolio weights assigned to each position Wexford Capital allocated the biggest weight to Mammoth Energy Services, Inc. (NASDAQ:TUSK), around 7.59% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, designating 0.25 percent of its 13F equity portfolio to TUSK.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: 999. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Ardsley Partners).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Mammoth Energy Services, Inc. (NASDAQ:TUSK) but similarly valued. These stocks are Garrison Capital Inc (NASDAQ:GARS), BioXcel Therapeutics, Inc. (NASDAQ:BTAI), HMN Financial, Inc. (NASDAQ:HMNF), and Northern Technologies International Corp (NASDAQ:NTIC). All of these stocks’ market caps match TUSK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GARS | 2 | 423 | 0 |
| BTAI | 3 | 2923 | 2 |
| HMNF | 3 | 15418 | 0 |
| NTIC | 5 | 7660 | 2 |
| Average | 3.25 | 6606 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.25 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $56 million in TUSK’s case. Northern Technologies International Corp (NASDAQ:NTIC) is the most popular stock in this table. On the other hand Garrison Capital Inc (NASDAQ:GARS) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Mammoth Energy Services, Inc. (NASDAQ:TUSK) 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. Unfortunately TUSK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TUSK were disappointed as the stock returned -36.7% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
