Should You Avoid Nuverra Environmental Solutions Inc (NES)?

While the market driven by short-term sentiment influenced by uncertainty regarding the future of the interest rate environment in the US, the low commodity prices and the economic turmoil in China, many smart money investors are keeping their optimism regarding the current bull run, while still hedging many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Nuverra Environmental Solutions Inc (NYSE:NES).

Nuverra Environmental Solutions Inc was in 4 hedge funds’ portfolios at the end of September. NES has experienced a decrease in enthusiasm from smart money recently. There were 6 hedge funds in our database with NES positions at the end of the previous 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 Penn Virginia Corporation (NYSE:PVA), ImmunoCellular Therapeutics Ltd (NYSEMKT:IMUC), and Rand Logistics, Inc. (NASDAQ:RLOG) to gather more data points.

If you’d ask most traders, hedge funds are perceived as worthless, outdated investment vehicles of the past. While there are greater than 8,000 funds with their doors open at present, Our researchers look at the bigwigs of this group, approximately 700 funds. These hedge fund managers administer bulk of all hedge funds’ total capital, and by paying attention to their highest performing equity investments, Insider Monkey has unsheathed various investment strategies that have historically outpaced the market. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Now, we’re going to check out the key action encompassing Nuverra Environmental Solutions Inc (NYSE:NES).

How are hedge funds trading Nuverra Environmental Solutions Inc (NYSE:NES)?

At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Richard Mashaal’s Rima Senvest Management has the most valuable position in Nuverra Environmental Solutions Inc (NYSE:NES), worth close to $2.7 million, accounting for 0.2% of its total 13F portfolio. The second most bullish fund manager is Riverloft Capital Management, led by Marc Lehmann, holding a $0.4 million position; 0.1% of its 13F portfolio is allocated to the company. Other peers that are bullish include D E Shaw.

Because Nuverra Environmental Solutions Inc (NYSE:NES) has witnessed declining sentiment from the smart money, logic holds that there were a few fund managers who were dropping their full holdings heading into Q4. Interestingly, Israel Englander’s Millennium Management said goodbye to the biggest position of the 700 funds followed by Insider Monkey, worth an estimated $0.2 million in stock, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners was right behind this move, as the fund sold off about $0.1 million worth. These transactions are important to note, as total hedge fund interest dropped by 2 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Nuverra Environmental Solutions Inc (NYSE:NES). We will take a look at Penn Virginia Corporation (NYSE:PVA), ImmunoCellular Therapeutics Ltd (NYSEMKT:IMUC), Rand Logistics, Inc. (NASDAQ:RLOG), and Identive Group, Inc. (NASDAQ:INVE). This group of stocks’ market caps are closest to NES’s market cap.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $3 million in NES’s case. Penn Virginia Corporation (NYSE:PVA) is the most popular stock in this table. On the other hand ImmunoCellular Therapeutics Ltd (NYSEMKT:IMUC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Nuverra Environmental Solutions Inc (NYSE:NES) is as less popular as IMUC. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.