Should I Buy Schlumberger Limited. (SLB)?

In this article we will analyze whether Schlumberger Limited. (NYSE:SLB) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Hedge fund interest in Schlumberger Limited. (NYSE:SLB) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SLB isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). 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 Cummins Inc. (NYSE:CMI), The Travelers Companies Inc (NYSE:TRV), and DocuSign, Inc. (NASDAQ:DOCU) to gather more data points.

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 S&P 500 ETFs by 115 percentage points since March 2017 (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.

Frank Brosens of Taconic Capital

At Insider Monkey we leave no stone unturned when looking for 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, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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 homepage. With all of this in mind let’s take a peek at the latest hedge fund action encompassing Schlumberger Limited. (NYSE:SLB).

Do Hedge Funds Think SLB Is A Good Stock To Buy Now?

At first quarter’s end, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards SLB over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Fisher Asset Management held the most valuable stake in Schlumberger Limited. (NYSE:SLB), which was worth $398.3 million at the end of the fourth quarter. On the second spot was D E Shaw which amassed $178.9 million worth of shares. Citadel Investment Group, Laurion Capital Management, and Orbis Investment 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 Lodge Hill Capital allocated the biggest weight to Schlumberger Limited. (NYSE:SLB), around 2.67% of its 13F portfolio. Hourglass Capital is also relatively very bullish on the stock, setting aside 2.59 percent of its 13F equity portfolio to SLB.

Due to the fact that Schlumberger Limited. (NYSE:SLB) has faced a decline in interest from hedge fund managers, logic holds that there were a few funds that decided to sell off their full holdings last quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the biggest stake of all the hedgies monitored by Insider Monkey, comprising an estimated $75.6 million in stock. Renaissance Technologies, also dropped its stock, about $45.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to Schlumberger Limited. (NYSE:SLB). These stocks are Cummins Inc. (NYSE:CMI), The Travelers Companies Inc (NYSE:TRV), DocuSign, Inc. (NASDAQ:DOCU), Synopsys, Inc. (NASDAQ:SNPS), Kinder Morgan Inc (NYSE:KMI), General Mills, Inc. (NYSE:GIS), and Simon Property Group, Inc (NYSE:SPG). This group of stocks’ market caps are similar to SLB’s market cap.

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As you can see these stocks had an average of 38 hedge funds with bullish positions and the average amount invested in these stocks was $1230 million. That figure was $1142 million in SLB’s case. DocuSign, Inc. (NASDAQ:DOCU) is the most popular stock in this table. On the other hand General Mills, Inc. (NYSE:GIS) is the least popular one with only 31 bullish hedge fund positions. Schlumberger Limited. (NYSE:SLB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SLB is 62.3. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Hedge funds were also right about betting on SLB as the stock returned 15.5% since the end of Q1 (through 6/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.