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Do Hedge Funds Love Oil States International, Inc. (OIS)?

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the third quarter. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Oil States International, Inc. (NYSE:OIS).

Oil States International, Inc. (NYSE:OIS) investors should pay attention to an increase in enthusiasm from smart money lately. Our calculations also showed that OIS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chuck Royce

Chuck Royce of Royce & Associates

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy  based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We’re going to take a gander at the latest hedge fund action regarding Oil States International, Inc. (NYSE:OIS).

What does smart money think about Oil States International, Inc. (NYSE:OIS)?

At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in OIS a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

More specifically, Millennium Management was the largest shareholder of Oil States International, Inc. (NYSE:OIS), with a stake worth $15.6 million reported as of the end of September. Trailing Millennium Management was Balyasny Asset Management, which amassed a stake valued at $7.2 million. Citadel Investment Group, Royce & Associates, and Renaissance Technologies 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 Algert Coldiron Investors allocated the biggest weight to Oil States International, Inc. (NYSE:OIS), around 0.06% of its 13F portfolio. Balyasny Asset Management is also relatively very bullish on the stock, designating 0.05 percent of its 13F equity portfolio to OIS.

With a general bullishness amongst the heavyweights, key money managers have jumped into Oil States International, Inc. (NYSE:OIS) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, established the most outsized position in Oil States International, Inc. (NYSE:OIS). Balyasny Asset Management had $7.2 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $0.5 million position during the quarter. The other funds with brand new OIS positions are Peter Algert and Kevin Coldiron’s Algert Coldiron Investors and Benjamin A. Smith’s Laurion Capital Management.

Let’s go over hedge fund activity in other stocks similar to Oil States International, Inc. (NYSE:OIS). We will take a look at Dova Pharmaceuticals, Inc. (NASDAQ:DOVA), Tactile Systems Technology, Inc. (NASDAQ:TCMD), Associated Capital Group, Inc. (NYSE:AC), and Central Securities Corporation (NYSE:CET). This group of stocks’ market valuations resemble OIS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DOVA 12 165203 3
TCMD 10 25776 -5
AC 6 64036 0
CET 1 11460 -1
Average 7.25 66619 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $67 million. That figure was $40 million in OIS’s case. Dova Pharmaceuticals, Inc. (NASDAQ:DOVA) is the most popular stock in this table. On the other hand Central Securities Corporation (NYSE:CET) is the least popular one with only 1 bullish hedge fund positions. Oil States International, Inc. (NYSE:OIS) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on OIS as the stock returned 19.8% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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