Should You Avoid Flotek Industries Inc (FTK)?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 5.2% in the 12 month-period that ended October 30, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular S&P 500 stocks among the hedge fund investors tracked by the Insider Monkey team returned 9.5% over the same period, which provides evidence that these money managers do have great stock picking abilities. Even more to that, 63% of these stocks managed to beat the S&P 500 Index. 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 Flotek Industries Inc (NYSE:FTK).

Flotek Industries Inc (NYSE:FTK) shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late. It seems a little surprising as the shares of Flotek Industries Inc (NYSE:FTK) were trading 33.28% higher throughout the quarter. For a better understanding of the hedge fund sentiment, we will cover hedge funds holding positions in Flotek Industries Inc (NYSE:FTK), at the end of the last quarter.

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 Rapid7 Inc (NASDAQ:RPD), Globe Specialty Metals, Inc. (NASDAQ:GSM), and Astronics Corporation (NASDAQ:ATRO) to gather more data points.

In today’s marketplace, there are dozens of gauges investors can use to appraise their stock investments. Two of the most innovative gauges are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the best fund managers can outclass the market by a significant margin (see the details here).

Now, we’re going to view the fresh action surrounding Flotek Industries Inc (NYSE:FTK).

What does the smart money think about Flotek Industries Inc (NYSE:FTK)?

Heading into Q4, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a decrease of 7% from one quarter earlier. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Jeffrey Gates’ Gates Capital Management has the number one position in Flotek Industries Inc (NYSE:FTK), worth close to $76.4 million, amounting to 3% of its total 13F portfolio. Sitting at the No. 2 spot is Millennium Management, led by Israel Englander, holding a $39.5 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions contain David Nierenberg’s Nierenberg Investment Management, Richard Driehaus’ Driehaus Capital, and William Harnisch’s Peconic Partners LLC.

Due to the fact that Flotek Industries Inc (NYSE:FTK) has experienced a declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of funds who sold off their positions entirely in the third quarter. Interestingly, Douglas T. Granat’s Trigran Investments dumped the biggest investment of all the hedgies watched by Insider Monkey, valued at close to $4.9 million in call options. Glenn Russell Dubin’s fund, Highbridge Capital Management, also said goodbye to its call options, about $1.3 million worth of options. These transactions are interesting, as total hedge fund interest dropped by 1 fund in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Flotek Industries Inc (NYSE:FTK). These stocks are Rapid7 Inc (NASDAQ:RPD), Globe Specialty Metals, Inc. (NASDAQ:GSM), Astronics Corporation (NASDAQ:ATRO), and Advantage Oil & Gas Ltd (USA) (NYSE:AAV). All of these stocks’ market caps resemble Flotek Industries Inc (NYSE:FTK)’s market cap.

As you can see, these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $174 million in Flotek Industries Inc (NYSE:FTK)’s case. Globe Specialty Metals, Inc. (NASDAQ:GSM) is the most popular stock in this table. On the other hand, Rapid7 Inc (NASDAQ:RPD) is the least popular one with only 5 bullish hedge fund positions. Flotek Industries Inc (NYSE:FTK) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Globe Specialty Metals, Inc. (NASDAQ:GSM) might be a better candidate to consider a long position.