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Do Hedge Funds Love Newpark Resources Inc (NR)?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Newpark Resources Inc (NYSE:NR).

Is Newpark Resources Inc (NYSE:NR) undervalued? Prominent investors are betting on the stock. The number of bullish hedge fund positions improved by 2 lately. Our calculations also showed that NR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). NR was in 10 hedge funds’ portfolios at the end of September. There were 8 hedge funds in our database with NR holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are plenty of indicators shareholders can use to grade stocks. A pair of the most underrated indicators are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can beat their index-focused peers by a significant amount (see the details here).

David Harding

David Harding of Winton Capital Management

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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the fresh hedge fund action surrounding Newpark Resources Inc (NYSE:NR).

How are hedge funds trading Newpark Resources Inc (NYSE:NR)?

At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the second quarter of 2019. On the other hand, there were a total of 14 hedge funds with a bullish position in NR a year ago. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

More specifically, Royce & Associates was the largest shareholder of Newpark Resources Inc (NYSE:NR), with a stake worth $20.5 million reported as of the end of September. Trailing Royce & Associates was Renaissance Technologies, which amassed a stake valued at $2 million. Winton Capital Management, PDT Partners, and Paloma Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Newpark Resources Inc (NYSE:NR), around 0.19% of its 13F portfolio. HighVista Strategies is also relatively very bullish on the stock, setting aside 0.06 percent of its 13F equity portfolio to NR.

As aggregate interest increased, specific money managers have jumped into Newpark Resources Inc (NYSE:NR) headfirst. Paloma Partners, managed by Donald Sussman, created the largest position in Newpark Resources Inc (NYSE:NR). Paloma Partners had $0.4 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital and Andre F. Perold’s HighVista Strategies.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Newpark Resources Inc (NYSE:NR) but similarly valued. These stocks are Kura Oncology, Inc. (NASDAQ:KURA), Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA), First Foundation Inc (NASDAQ:FFWM), and Impinj, Inc. (NASDAQ:PI). This group of stocks’ market valuations resemble NR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KURA 18 192205 -4
LOMA 9 21002 -5
FFWM 12 72231 2
PI 15 213268 -2
Average 13.5 124677 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $125 million. That figure was $25 million in NR’s case. Kura Oncology, Inc. (NASDAQ:KURA) is the most popular stock in this table. On the other hand Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE:LOMA) is the least popular one with only 9 bullish hedge fund positions. Newpark Resources Inc (NYSE:NR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately NR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NR investors were disappointed as the stock returned -23.1% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

Disclosure: None. This article was originally published at Insider Monkey.

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