Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Newpark Resources Inc (NYSE:NR) was in 12 hedge funds’ portfolios at the end of September. NR has experienced a decrease in hedge fund sentiment in recent months. There were 14 hedge funds in our database with NR holdings at the end of the previous quarter. At the end of this article we will also compare NR to other stocks including BreitBurn Energy Partners L.P. (NASDAQ:BBEP), Medley Capital Corp (NYSE:MCC), and Centrue Financial Corp (NASDAQ:CFCB) to get a better sense of its popularity.
Follow Npk International Inc. (NYSE:NR)
Follow Npk International Inc. (NYSE:NR)
With all of this in mind, let’s take a gander at the latest action encompassing Newpark Resources Inc (NYSE:NR).
How have hedgies been trading Newpark Resources Inc (NYSE:NR)?
Heading into Q4, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the second quarter. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Chuck Royce’s Royce & Associates has the most valuable position in Newpark Resources Inc (NYSE:NR), worth close to $10.2 million, comprising 0.1% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, led by Jim Simons, holding a $5 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions encompass Israel Englander’s Millennium Management, John Overdeck and David Siegel’s Two Sigma Advisors and Cliff Asness’s AQR Capital Management.
Due to the fact that Newpark Resources Inc (NYSE:NR) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there exists a select few fund managers who sold off their positions entirely heading into Q4. It’s worth mentioning that Ken Griffin’s Citadel Investment Group said goodbye to the largest stake of the 700 funds monitored by Insider Monkey, totaling an estimated $9.4 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also said goodbye to its stock, about $1 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 2 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Newpark Resources Inc (NYSE:NR) but similarly valued. We will take a look at BreitBurn Energy Partners L.P. (NASDAQ:BBEP), Medley Capital Corp (NYSE:MCC), Centrue Financial Corp (NASDAQ:CFCB), and AK Steel Holding Corporation (NYSE:AKS). This group of stocks’ market valuations are closest to NR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BBEP | 5 | 4555 | -1 |
| MCC | 4 | 9879 | -1 |
| TRUE | 11 | 69465 | -5 |
| AKS | 19 | 53452 | -1 |
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $25 million in NR’s case. AK Steel Holding Corporation (NYSE:AKS) is the most popular stock in this table. On the other hand Medley Capital Corp (NYSE:MCC) is the least popular one with only 4 bullish hedge fund positions. Newpark Resources Inc (NYSE:NR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AKS might be a better candidate to consider a long position.
