The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards Baker Hughes Incorporated (NYSE:BHI), and what that likely means for the prospects of the company and its stock.
Baker Hughes Incorporated (NYSE:BHI) shareholders have witnessed a decrease in hedge fund sentiment lately.
Today there are a multitude of signals that stock traders employ to analyze publicly-traded companies. Some of the most underrated signals are hedge fund and insider trading activity. Hedge fund experts at Insider Monkey have shown that, historically, those who follow the best picks of the top money managers can beat their index-focused peers by a very impressive margin (see the details here).
Keeping this in mind, we’re going to take a look at the fresh action surrounding Baker Hughes Incorporated (NYSE:BHI).
What have hedge funds been doing with Baker Hughes Incorporated (NYSE:BHI)?
Heading into Q4, a total of 53 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully.
According to hedge fund intelligence website Insider Monkey, Jeffrey Ubben’s ValueAct Capital had the largest position in Baker Hughes Incorporated (NYSE:BHI), worth close to $1.2098 billion, corresponding to 7% of its total 13F portfolio. Coming in second is Pentwater Capital Management, managed by Matthew Halbower, which held a $429.1 million position; the fund has 3.8% of its 13F portfolio invested in the stock. Remaining hedge funds that are bullish consist of D. E. Shaw’s D E Shaw, Richard S. Pzena’s Pzena Investment Management and John Overdeck and David Siegel’s Two Sigma Advisors.
Since Baker Hughes Incorporated (NYSE:BHI) has witnessed bearish sentiment from hedge fund managers, it’s safe to say that there exists a select few fund managers that elected to cut their positions entirely in the third quarter. Intriguingly, Ken Griffin’s Citadel Investment Group dumped the largest position of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $210.9 million in stock. Nick Niell’s fund, Arrowgrass Capital Partners, also sold off its stock, about $116.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 20 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to Baker Hughes Incorporated (NYSE:BHI). These stocks are Hilton Worldwide Holdings Inc (NYSE:HLT), Discover Financial Services (NYSE:DFS), Waste Management, Inc. (NYSE:WM), and Activision Blizzard, Inc. (NASDAQ:ATVI). This group of stocks’ market caps resembles BHI’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 44 hedge funds with bullish positions and the average amount invested in these stocks were $1.71 billion.