We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on Valaris plc (NYSE:VAL).
Is Valaris plc (NYSE:VAL) the right pick for your portfolio? Money managers are turning less bullish. The number of long hedge fund bets decreased by 2 recently. Our calculations also showed that VAL isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Jonathan Barrett of Luminus Management
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with 77% accuracy, so we check out his stock picks. A former hedge fund manager is pitching the “next Amazon” in this video; again we are listening. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the fresh hedge fund action encompassing Valaris plc (NYSE:VAL).
Hedge fund activity in Valaris plc (NYSE:VAL)
At Q4’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the previous quarter. By comparison, 34 hedge funds held shares or bullish call options in VAL a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
More specifically, Luminus Management was the largest shareholder of Valaris plc (NYSE:VAL), with a stake worth $242.6 million reported as of the end of September. Trailing Luminus Management was Contrarius Investment Management, which amassed a stake valued at $126.4 million. Odey Asset Management Group, Pzena Investment Management, and King Street Capital 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 Luminus Management allocated the biggest weight to Valaris plc (NYSE:VAL), around 10.1% of its 13F portfolio. Odey Asset Management Group is also relatively very bullish on the stock, dishing out 6.72 percent of its 13F equity portfolio to VAL.
Seeing as Valaris plc (NYSE:VAL) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there exists a select few fund managers that elected to cut their full holdings heading into Q4. It’s worth mentioning that Joshua Friedman and Mitchell Julis’s Canyon Capital Advisors said goodbye to the largest investment of the 750 funds followed by Insider Monkey, valued at an estimated $35.1 million in stock, and Himanshu H. Shah’s Shah Capital Management was right behind this move, as the fund dropped about $11 million worth. These moves are important to note, as total hedge fund interest fell by 2 funds heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Valaris plc (NYSE:VAL) but similarly valued. We will take a look at Camping World Holdings, Inc. (NYSE:CWH), Summit Hotel Properties Inc (NYSE:INN), Schweitzer-Mauduit International, Inc. (NYSE:SWM), and Granite Construction Incorporated (NYSE:GVA). This group of stocks’ market values resemble VAL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CWH | 15 | 165793 | 3 |
| INN | 15 | 27825 | -1 |
| SWM | 13 | 44583 | 4 |
| GVA | 7 | 24651 | -6 |
| Average | 12.5 | 65713 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $519 million in VAL’s case. Camping World Holdings, Inc. (NYSE:CWH) is the most popular stock in this table. On the other hand Granite Construction Incorporated (NYSE:GVA) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Valaris plc (NYSE:VAL) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st and still beat the market by 12.9 percentage points. Unfortunately VAL wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on VAL were disappointed as the stock returned -93.6% during the four months of 2020 (through May 1st) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
