In this article you are going to find out whether hedge funds think Superior Energy Services, Inc. (NYSE:SPN) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Superior Energy Services, Inc. (NYSE:SPN) was in 8 hedge funds' portfolios at the end of the first quarter of 2020. SPN has experienced a decrease in enthusiasm from smart money of late. There were 10 hedge funds in our database with SPN positions at the end of the previous quarter. Our calculations also showed that SPN isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
To most market participants, hedge funds are assumed to be slow, old financial vehicles of yesteryear. While there are greater than 8000 funds with their doors open today, Our researchers choose to focus on the bigwigs of this club, around 850 funds. It is estimated that this group of investors preside over the majority of the smart money's total capital, and by tracking their unrivaled investments, Insider Monkey has deciphered several investment strategies that have historically outstripped the market. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
[caption id="attachment_338702" align="aligncenter" width="394"] Michael Weinstock of Monarch Alternative Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. 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. With all of this in mind we're going to go over the new hedge fund action surrounding Superior Energy Services, Inc. (NYSE:SPN).
What have hedge funds been doing with Superior Energy Services, Inc. (NYSE:SPN)?
At the end of the first quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in SPN over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Monarch Alternative Capital held the most valuable stake in Superior Energy Services, Inc. (NYSE:SPN), which was worth $1.6 million at the end of the third quarter. On the second spot was Madison Avenue Partners which amassed $1.4 million worth of shares. Aristeia Capital, Millennium Management, and Newtyn Management 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 Covalent Capital Partners allocated the biggest weight to Superior Energy Services, Inc. (NYSE:SPN), around 1.34% of its 13F portfolio. Madison Avenue Partners is also relatively very bullish on the stock, earmarking 0.71 percent of its 13F equity portfolio to SPN.
Because Superior Energy Services, Inc. (NYSE:SPN) has faced bearish sentiment from hedge fund managers, we can see that there exists a select few fund managers who sold off their positions entirely last quarter. It's worth mentioning that Till Bechtolsheimer's Arosa Capital Management cut the largest stake of all the hedgies tracked by Insider Monkey, comprising close to $0.5 million in stock, and Joe Huber's Huber Capital Management was right behind this move, as the fund sold off about $0.5 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 2 funds last quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Superior Energy Services, Inc. (NYSE:SPN) but similarly valued. We will take a look at Big 5 Sporting Goods Corporation (NASDAQ:BGFV), BioCardia, Inc. (NASDAQ:BCDA), United States Antimony Corporation (NYSE:UAMY), and ADDvantage Technologies Group, Inc. (NASDAQ:AEY). This group of stocks' market valuations are similar to SPN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BGFV,12,4202,3 BCDA,1,104,0 UAMY,1,21,-1 AEY,1,1016,0 Average,3.75,1336,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.75 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $6 million in SPN's case. Big 5 Sporting Goods Corporation (NASDAQ:BGFV) is the most popular stock in this table. On the other hand BioCardia, Inc. (NASDAQ:BCDA) is the least popular one with only 1 bullish hedge fund positions. Superior Energy Services, Inc. (NYSE:SPN) 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. 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 12.2% in 2020 through June 17th but beat the market by 14.8 percentage points. Unfortunately SPN wasn't nearly as popular as these 10 stocks and hedge funds that were betting on SPN were disappointed as the stock returned 0.7% during the same time period 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.