Hedge Funds Are Coming Back To Patterson-UTI Energy, Inc. (PTEN)

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Patterson-UTI Energy, Inc. (NASDAQ:PTEN) and determine whether hedge funds had an edge regarding this stock.

Is Patterson-UTI Energy, Inc. (NASDAQ:PTEN) going to take off soon? The best stock pickers were betting on the stock. The number of bullish hedge fund bets went up by 6 in recent months. Patterson-UTI Energy, Inc. (NASDAQ:PTEN) was in 26 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 43. Our calculations also showed that PTEN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are numerous signals shareholders have at their disposal to appraise their holdings. Two of the less known signals are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the top fund managers can beat their index-focused peers by a superb amount (see the details here).


Cliff Asness of AQR Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to take a gander at the fresh hedge fund action regarding Patterson-UTI Energy, Inc. (NASDAQ:PTEN).

How are hedge funds trading Patterson-UTI Energy, Inc. (NASDAQ:PTEN)?

At second quarter’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PTEN over the last 20 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Is PTEN A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of Patterson-UTI Energy, Inc. (NASDAQ:PTEN), with a stake worth $44 million reported as of the end of September. Trailing Renaissance Technologies was Kahn Brothers, which amassed a stake valued at $20.2 million. Millennium Management, AQR Capital Management, and D E Shaw 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 Kahn Brothers allocated the biggest weight to Patterson-UTI Energy, Inc. (NASDAQ:PTEN), around 3.42% of its 13F portfolio. Cerebellum Capital is also relatively very bullish on the stock, designating 1.2 percent of its 13F equity portfolio to PTEN.

Now, specific money managers were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, initiated the most valuable position in Patterson-UTI Energy, Inc. (NASDAQ:PTEN). Point72 Asset Management had $9.2 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $4.5 million investment in the stock during the quarter. The following funds were also among the new PTEN investors: Clint Carlson’s Carlson Capital, David Andre and Astro Teller’s Cerebellum Capital, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Patterson-UTI Energy, Inc. (NASDAQ:PTEN) but similarly valued. We will take a look at CTS Corporation (NYSE:CTS), Hawaiian Holdings, Inc. (NASDAQ:HA), Meten EdtechX Education Group Ltd. (NASDAQ:METX), PDF Solutions, Inc. (NASDAQ:PDFS), Kforce Inc. (NASDAQ:KFRC), Orion Engineered Carbons SA (NYSE:OEC), and ConnectOne Bancorp Inc (NASDAQ:CNOB). This group of stocks’ market valuations are similar to PTEN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CTS 14 60046 5
HA 12 35650 -7
METX 3 194 3
PDFS 13 25744 1
KFRC 16 46166 1
OEC 21 123131 0
CNOB 11 34533 0
Average 12.9 46495 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.9 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $151 million in PTEN’s case. Orion Engineered Carbons SA (NYSE:OEC) is the most popular stock in this table. On the other hand Meten EdtechX Education Group Ltd. (NASDAQ:METX) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Patterson-UTI Energy, Inc. (NASDAQ:PTEN) is more popular among hedge funds. Our overall hedge fund sentiment score for PTEN is 78.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Unfortunately PTEN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on PTEN were disappointed as the stock returned -17.2% since the end of the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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