Should You Buy Archrock Inc (AROC)?

Is Archrock Inc (NYSE:AROC) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from industry insiders. They fail miserably sometimes, but historically their consensus stock picks outperformed the market after adjusting for known risk factors.

Is Archrock Inc (NYSE:AROC) ready to rally soon? The best stock pickers are taking an optimistic view. The number of long hedge fund positions inched up by 1 lately. 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 Otter Tail Corporation (NASDAQ:OTTR), Ultra Petroleum Corp. (NYSE:UPL), and ScanSource, Inc. (NASDAQ:SCSC) to gather more data points.

At the moment, there are a lot of signals shareholders employ to appraise publicly traded companies. A pair of the most underrated signals are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the elite investment managers can trounce the broader indices by a solid margin (see the details here).

Now, let’s go over the latest action regarding Archrock Inc (NYSE:AROC).

What have hedge funds been doing with Archrock Inc (NYSE:AROC)?

Heading into Q4, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 20% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Alec Litowitz and Ross Laser’s Magnetar Capital has the most valuable position in Archrock Inc (NYSE:AROC), worth close to $16.8 million, corresponding to 0.4% of its total 13F portfolio. The second most bullish fund manager is Michael Platt and William Reeves of BlueCrest Capital Mgmt., with a $5 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other peers with similar optimism comprise Chuck Royce’s Royce & Associates, Renaissance Technologies, and Ken Griffin’s Citadel Investment Group.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. BlueCrest Capital Mgmt. was among the hedge funds initiating new positions in Archrock Inc (NYSE:AROC).

Let’s go over hedge fund activity in other stocks similar to Archrock Inc (NYSE:AROC). We will take a look at Otter Tail Corporation (NASDAQ:OTTR), Ultra Petroleum Corp. (NYSE:UPL), ScanSource, Inc. (NASDAQ:SCSC), and Xoom Corp (NASDAQ:XOOM). All of these stocks’ market caps are similar to Archrock Inc (NYSE:AROC)’s market cap.

As you can see, these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $28 million in Archrock Inc (NYSE:AROC)’s case. Ultra Petroleum Corp. (NYSE:UPL) is the most popular stock in this table. On the other hand, Otter Tail Corporation (NASDAQ:OTTR) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks, Archrock Inc (NYSE:AROC) is even less popular than Otter Tail Corporation (NASDAQ:OTTR). 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.