Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Ranger Energy Services, Inc. (NYSE:RNGR).
Is Ranger Energy Services, Inc. (NYSE:RNGR) worth your attention right now? Prominent investors were reducing their bets on the stock. The number of long hedge fund positions were trimmed by 1 in recent months. Ranger Energy Services, Inc. (NYSE:RNGR) was in 3 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 9. Our calculations also showed that RNGR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Chuck Royce of Royce & Associates
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s view the recent hedge fund action regarding Ranger Energy Services, Inc. (NYSE:RNGR).
What have hedge funds been doing with Ranger Energy Services, Inc. (NYSE:RNGR)?
At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the second quarter of 2020. By comparison, 3 hedge funds held shares or bullish call options in RNGR a year ago. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
The largest stake in Ranger Energy Services, Inc. (NYSE:RNGR) was held by Royce & Associates, which reported holding $1.3 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $0.1 million position. The only other hedge fund that is bullish on the company was Millennium Management.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Plaisance Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified RNGR as a viable investment and initiated a position in the stock.
Let’s now review hedge fund activity in other stocks similar to Ranger Energy Services, Inc. (NYSE:RNGR). We will take a look at Apollo Endosurgery, Inc. (NASDAQ:APEN), Phunware, Inc. (NASDAQ:PHUN), Home Federal Bancorp Inc of Louisiana (NASDAQ:HFBL), Express, Inc. (NYSE:EXPR), ARC Document Solutions Inc (NYSE:ARC), Ekso Bionics Holdings, Inc. (NASDAQ:EKSO), and ImmuCell Corporation (NASDAQ:ICCC). This group of stocks’ market valuations match RNGR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| APEN | 5 | 6361 | 0 |
| PHUN | 4 | 389 | -1 |
| HFBL | 1 | 231 | 0 |
| EXPR | 13 | 10498 | 0 |
| ARC | 5 | 3317 | 0 |
| EKSO | 3 | 4100 | 1 |
| ICCC | 2 | 927 | 0 |
| Average | 4.7 | 3689 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.7 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $1 million in RNGR’s case. Express, Inc. (NYSE:EXPR) is the most popular stock in this table. On the other hand Home Federal Bancorp Inc of Louisiana (NASDAQ:HFBL) is the least popular one with only 1 bullish hedge fund positions. Ranger Energy Services, Inc. (NYSE:RNGR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RNGR is 22.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on RNGR as the stock returned 29% since the end of the third quarter (through 11/23) and outperformed the market by an even larger margin.
Follow Ranger Energy Services Inc. (NYSE:RNGR)
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Disclosure: None. This article was originally published at Insider Monkey.
