After its nearly 50% plunge from late July through mid-December, Halliburton Company (NYSE:HAL) had a number of bullish funds open positions on it during the fourth quarter of 2014, hoping to catch the rebound. While Gayner was not one of the overly bullish investors, he did also open a small position of 15,000 shares during that quarter, and increased it to 155,000 shares during the first quarter, with the current holding having a value of $6.08 million. Halliburton Company (NYSE:HAL) has indeed rebounded, rising by 25% over the past five months. Halliburton appears to have appeased the markets in a similar fashion as Schlumberger did, cutting 9,000 jobs during that period and vowing to cut capital spending by 15% in 2015. The stock currently trades at a P/E of 18.62, with Halliburton beating earnings estimates last quarter with $0.49 per share in earnings, easily topping estimates of $0.36. Among those bullish investors who have benefited from the rebound are Jeffrey Ubben’s ValueAct Capital and Glenn Greenberg’s Brave Warrior Capital.
Lastly we come to National-Oilwell Varco, Inc. (NYSE:NOV), a stock recommended at last year’s Delivering Alpha Conference by billionaire Larry Robbins, and which is also held by Warren Buffett. Gayner owns a position of 575,000 shares worth $28.74 million, having increased the position by 21% during the first quarter. While National-Oilwell Varco, Inc. (NYSE:NOV) also had an earnings beat last quarter with adjusted earnings of $1.14 per share beating estimates by $0.04, its shares are nonetheless down by 22% in 2015. While the company expects revenue to slide for the next few quarters, CEO Clay Williams did hint at the possibility of an acquisition, claiming National-Oilwell Varco, Inc. (NYSE:NOV) has the financial resources to do so. Shares are currently trading at a P/E of just 9.94, well below most of its industry peers.
Hedge funds and other big money managers like Gayner tend to have the largest amounts of their capital invested in large and mega-cap stocks because these companies allow for much greater capital allocation. That’s why if we take a look at the most popular stocks among funds, we won’t find any mid- or small-cap stocks there. However, our backtests of hedge funds’ equity portfolios between 1999 and 2012 revealed that the 50 most popular stocks among hedge funds underperformed the market by seven basis points per month. On the other hand, their top small-cap picks performed considerably better, outperforming the market by 95 basis points per month. This was confirmed through backtesting and in forward tests of our small-cap strategy since 2012. The strategy, which involves imitating the 15 most popular small-cap picks among hedge funds has provided gains of more than 137%, beating the broader market by over 82 percentage points through the end of March (see the details).
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