Is C&J Energy Services Inc (NYSE:CJES) a buy, sell, or hold? The smart money is taking a bearish view. The number of long hedge fund bets stayed the same which is a slightly negative development in our experience
To most traders, hedge funds are assumed to be unimportant, old investment vehicles of years past. While there are greater than 8000 funds trading at the moment, we choose to focus on the top tier of this group, about 450 funds. Most estimates calculate that this group oversees the lion’s share of all hedge funds’ total capital, and by watching their best equity investments, we have unsheathed a few investment strategies that have historically beaten the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).
Equally as integral, optimistic insider trading activity is another way to break down the financial markets. Just as you’d expect, there are plenty of incentives for a corporate insider to drop shares of his or her company, but just one, very simple reason why they would behave bullishly. Several empirical studies have demonstrated the valuable potential of this method if “monkeys” know what to do (learn more here).
Now, it’s important to take a glance at the recent action encompassing C&J Energy Services Inc (NYSE:CJES).
Hedge fund activity in C&J Energy Services Inc (NYSE:CJES)
Heading into Q2, a total of 10 of the hedge funds we track held long positions in this stock, a change of 0% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably.
When looking at the hedgies we track, Chuck Royce’s Royce & Associates had the most valuable position in C&J Energy Services Inc (NYSE:CJES), worth close to $42.5 million, accounting for 0.1% of its total 13F portfolio. The second largest stake is held by Citadel Investment Group, managed by Ken Griffin, which held a $32.5 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism include David Nierenberg’s Nierenberg Investment Management, George Soros’s Soros Fund Management and Neil Chriss’s Hutchin Hill Capital.
Judging by the fact that C&J Energy Services Inc (NYSE:CJES) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there were a few hedge funds who sold off their entire stakes in Q1. Intriguingly, Michael Johnston’s Steelhead Partners dropped the largest stake of the 450+ funds we track, comprising an estimated $8.6 million in stock.. Joshua Berkowitz’s fund, Woodbine Capital, also sold off its stock, about $1 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
What have insiders been doing with C&J Energy Services Inc (NYSE:CJES)?
Insider trading activity, especially when it’s bullish, is particularly usable when the company in focus has experienced transactions within the past half-year. Over the last 180-day time period, C&J Energy Services Inc (NYSE:CJES) has seen zero unique insiders buying, and 3 insider sales (see the details of insider trades here).
Let’s also take a look at hedge fund and insider activity in other stocks similar to C&J Energy Services Inc (NYSE:CJES). These stocks are TETRA Technologies, Inc. (NYSE:TTI), Exterran Holdings, Inc. (NYSE:EXH), Hornbeck Offshore Services, Inc. (NYSE:HOS), GulfMark Offshore, Inc. (NYSE:GLF), and Exterran Partners, L.P. (NASDAQ:EXLP). All of these stocks are in the oil & gas equipment & services industry and their market caps resemble CJES’s market cap.