The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Select Energy Services, Inc. (NYSE:WTTR).
Hedge fund interest in Select Energy Services, Inc. (NYSE:WTTR) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare WTTR to other stocks including KNOT Offshore Partners LP (NYSE:KNOP), Hanmi Financial Corp (NASDAQ:HAFC), and Quanex Building Products Corporation (NYSE:NX) to get a better sense of its popularity. Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_322405" align="aligncenter" width="392"] New York Stock Exchange[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to go over the fresh hedge fund action surrounding Select Energy Services, Inc. (NYSE:WTTR).
How are hedge funds trading Select Energy Services, Inc. (NYSE:WTTR)?
At Q1's end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WTTR over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
The largest stake in Select Energy Services, Inc. (NYSE:WTTR) was held by Encompass Capital Advisors, which reported holding $4.6 million worth of stock at the end of September. It was followed by Adage Capital Management with a $3.9 million position. Other investors bullish on the company included Brightlight Capital, Renaissance Technologies, and Arosa Capital Management. In terms of the portfolio weights assigned to each position Brightlight Capital allocated the biggest weight to Select Energy Services, Inc. (NYSE:WTTR), around 2.68% of its 13F portfolio. Encompass Capital Advisors is also relatively very bullish on the stock, dishing out 0.49 percent of its 13F equity portfolio to WTTR.
Due to the fact that Select Energy Services, Inc. (NYSE:WTTR) has experienced falling interest from the aggregate hedge fund industry, it's easy to see that there were a few hedge funds who were dropping their entire stakes by the end of the first quarter. It's worth mentioning that Matt Diserio and Disque Deane Jr.'s Water Asset Management dumped the largest investment of all the hedgies watched by Insider Monkey, totaling an estimated $1.6 million in stock. Donald Sussman's fund, Paloma Partners, also cut its stock, about $0.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks similar to Select Energy Services, Inc. (NYSE:WTTR). We will take a look at KNOT Offshore Partners LP (NYSE:KNOP), Hanmi Financial Corp (NASDAQ:HAFC), Quanex Building Products Corporation (NYSE:NX), and Experience Investment Corp. (NASDAQ:EXPC). This group of stocks' market values are closest to WTTR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KNOP,6,20344,1 HAFC,10,19189,-2 NX,13,35073,-7 EXPC,14,88922,9 Average,10.75,40882,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $18 million in WTTR's case. Experience Investment Corp. (NASDAQ:EXPC) is the most popular stock in this table. On the other hand KNOT Offshore Partners LP (NYSE:KNOP) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Select Energy Services, Inc. (NYSE:WTTR) 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 returned 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on WTTR as the stock returned 52.9% so far in Q2 (through June 25th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.