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Do Hedge Funds and Insiders Love Key Energy Services, Inc. (KEG)?

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Is Key Energy Services, Inc. (NYSE:KEG) a marvelous stock to buy now? Hedge funds are taking a bearish view. The number of long hedge fund positions decreased by 1 in recent months.

In the eyes of most market participants, hedge funds are assumed to be slow, outdated financial tools of yesteryear. While there are more than 8000 funds trading at the moment, we at Insider Monkey hone in on the aristocrats of this club, about 450 funds. Most estimates calculate that this group oversees the lion’s share of all hedge funds’ total asset base, and by keeping an eye on their best equity investments, we have come up with a number of investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

William HarnischJust as key, bullish insider trading activity is a second way to break down the investments you’re interested in. As the old adage goes: there are lots of motivations for a corporate insider to sell shares of his or her company, but just one, very obvious reason why they would behave bullishly. Many academic studies have demonstrated the useful potential of this tactic if investors know where to look (learn more here).

Now, we’re going to take a gander at the key action regarding Key Energy Services, Inc. (NYSE:KEG).

What have hedge funds been doing with Key Energy Services, Inc. (NYSE:KEG)?

Heading into Q2, a total of 18 of the hedge funds we track were bullish in this stock, a change of -5% from the first quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly.

Of the funds we track, MHR Fund Management, managed by Mark Rachesky, holds the largest position in Key Energy Services, Inc. (NYSE:KEG). MHR Fund Management has a $141.2 million position in the stock, comprising 5% of its 13F portfolio. The second largest stake is held by Peconic Partners LLC, managed by William Harnisch, which held a $27.6 million position; the fund has 4.3% of its 13F portfolio invested in the stock. Remaining hedge funds with similar optimism include Ken Griffin’s Citadel Investment Group, Chuck Royce’s Royce & Associates and David Costen Haley’s HBK Investments.

Since Key Energy Services, Inc. (NYSE:KEG) has faced declining sentiment from the smart money, it’s safe to say that there were a few funds who sold off their positions entirely at the end of the first quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management dropped the largest stake of the 450+ funds we monitor, comprising close to $11.2 million in stock., and Mike Vranos of Ellington was right behind this move, as the fund dumped about $0.2 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 1 funds at the end of the first quarter.

What do corporate executives and insiders think about Key Energy Services, Inc. (NYSE:KEG)?

Insider purchases made by high-level executives is particularly usable when the primary stock in question has seen transactions within the past half-year. Over the last 180-day time period, Key Energy Services, Inc. (NYSE:KEG) has experienced 6 unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Key Energy Services, Inc. (NYSE:KEG). These stocks are Bill Barrett Corporation (NYSE:BBG), W&T Offshore, Inc. (NYSE:WTI), Crestwood Midstream Partners LP (NYSE:CMLP), Seadrill Partners LLC (NYSE:SDLP), and Hercules Offshore, Inc. (NASDAQ:HERO). All of these stocks are in the oil & gas drilling & exploration industry and their market caps are closest to KEG’s market cap.

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