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Hedge Funds Are Buying Exterran Corporation (EXTN)

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 Exterran Corporation (NYSE:EXTN).

Exterran Corporation (NYSE:EXTN) investors should pay attention to an increase in support from the world’s most elite money managers recently. EXTN was in 18 hedge funds’ portfolios at the end of the third quarter of 2019. There were 14 hedge funds in our database with EXTN positions at the end of the previous quarter. Our calculations also showed that EXTN 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.

To most market participants, hedge funds are perceived as slow, outdated financial tools of yesteryear. While there are over 8000 funds in operation at the moment, We choose to focus on the masters of this group, about 750 funds. These money managers command bulk of the hedge fund industry’s total capital, and by tracking their first-class equity investments, Insider Monkey has determined a few investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Carlo Cannell

J. Carlo Cannell of Cannell Capital

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. We’re going to analyze the new hedge fund action encompassing Exterran Corporation (NYSE:EXTN).

How have hedgies been trading Exterran Corporation (NYSE:EXTN)?

At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from the second quarter of 2019. By comparison, 19 hedge funds held shares or bullish call options in EXTN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Cannell Capital was the largest shareholder of Exterran Corporation (NYSE:EXTN), with a stake worth $13.6 million reported as of the end of September. Trailing Cannell Capital was Renaissance Technologies, which amassed a stake valued at $10.7 million. D E Shaw, Millennium Management, and Citadel Investment Group 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 Cannell Capital allocated the biggest weight to Exterran Corporation (NYSE:EXTN), around 4.41% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, setting aside 0.16 percent of its 13F equity portfolio to EXTN.

As one would reasonably expect, key hedge funds were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the most valuable position in Exterran Corporation (NYSE:EXTN). Arrowstreet Capital had $1.6 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $0.6 million position during the quarter. The other funds with new positions in the stock are Thomas Bailard’s Bailard Inc, Donald Sussman’s Paloma Partners, and Michael Gelband’s ExodusPoint Capital.

Let’s now review hedge fund activity in other stocks similar to Exterran Corporation (NYSE:EXTN). These stocks are OraSure Technologies, Inc. (NASDAQ:OSUR), Capital City Bank Group, Inc. (NASDAQ:CCBG), Sinovac Biotech Ltd. (NASDAQ:SVA), and Stemline Therapeutics Inc (NASDAQ:STML). All of these stocks’ market caps are similar to EXTN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OSUR 19 82277 2
CCBG 3 8944 0
SVA 3 70156 0
STML 18 161684 1
Average 10.75 80765 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $46 million in EXTN’s case. OraSure Technologies, Inc. (NASDAQ:OSUR) is the most popular stock in this table. On the other hand Capital City Bank Group, Inc. (NASDAQ:CCBG) is the least popular one with only 3 bullish hedge fund positions. Exterran Corporation (NYSE:EXTN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 EXTN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EXTN were disappointed as the stock returned -58.8% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.

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

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