In this article we will take a look at whether hedge funds think KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) the right pick for your portfolio? The best stock pickers are in a bearish mood. The number of bullish hedge fund positions dropped by 5 lately. Our calculations also showed that KLXE 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.
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_375529" align="aligncenter" width="398"] Mario Gabelli of GAMCO Investors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's analyze the key hedge fund action surrounding KLX Energy Services Holdings, Inc. (NASDAQ:KLXE).
How have hedgies been trading KLX Energy Services Holdings, Inc. (NASDAQ:KLXE)?
At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -26% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in KLXE a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the largest position in KLX Energy Services Holdings, Inc. (NASDAQ:KLXE). Royce & Associates has a $0.5 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is David Paradice of Paradice Investment Management, with a $0.5 million position; 0.1% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism consist of Mario Gabelli's GAMCO Investors, Youlia Miteva's Proxima Capital Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position Proxima Capital Management allocated the biggest weight to KLX Energy Services Holdings, Inc. (NASDAQ:KLXE), around 1.98% of its 13F portfolio. Blue Grotto Capital is also relatively very bullish on the stock, setting aside 0.16 percent of its 13F equity portfolio to KLXE.
Judging by the fact that KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) has experienced falling interest from the smart money, it's easy to see that there is a sect of hedgies that decided to sell off their positions entirely last quarter. Interestingly, Frederick DiSanto's Ancora Advisors said goodbye to the biggest investment of the 750 funds followed by Insider Monkey, totaling close to $0.4 million in stock, and Minhua Zhang's Weld Capital Management was right behind this move, as the fund said goodbye to about $0.2 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 5 funds last quarter.
Let's go over hedge fund activity in other stocks similar to KLX Energy Services Holdings, Inc. (NASDAQ:KLXE). These stocks are Lazydays Holdings, Inc. (NASDAQ:LAZY), Zion Oil & Gas Inc (NASDAQ:ZN), Volt Information Sciences, Inc. (NYSE:VOLT), and Bionano Genomics, Inc. (NASDAQ:BNGO). This group of stocks' market valuations are closest to KLXE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LAZY,5,3627,0 ZN,2,553,-1 VOLT,4,1236,-1 BNGO,1,529,0 Average,3,1486,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $3 million in KLXE's case. Lazydays Holdings, Inc. (NASDAQ:LAZY) is the most popular stock in this table. On the other hand Bionano Genomics, Inc. (NASDAQ:BNGO) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) 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 KLXE as the stock returned 220% 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.