Hedge Funds Are Dumping Exterran Corp (EXTN)

The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Exterran Corp (NYSE:EXTN).

Exterran Corp (NYSE:EXTN) investors should pay attention to a decrease in hedge fund interest lately. EXTN was in 13 hedge funds’ portfolios at the end of September. There were 17 hedge funds in our database with EXTN positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as CoBiz Financial Inc (NASDAQ:COBZ), Student Transportation Inc (NASDAQ:STB), and First Trust High Income Long/short Fund (NYSE:FSD) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Hedge fund activity in Exterran Corp (NYSE:EXTN)

At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a fall of 24% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards EXTN over the last 5 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Alec Litowitz and Ross Laser’s Magnetar Capital holds the largest position in Exterran Corp (NYSE:EXTN). Magnetar Capital has a $51.2 million position in the stock. On Magnetar Capital’s heels is Clint Carlson’s Carlson Capital holding a $28.3 million position. Other peers with similar optimism include J. Carlo Cannell’s Cannell Capital, Millennium Management, one of the 10 largest hedge funds in the world, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Since Exterran Corp (NYSE:EXTN) has witnessed a decline in interest from the smart money, we can see that there was a specific group of hedgies who were dropping their entire stakes last quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the biggest stake of all the investors watched by Insider Monkey, comprising an estimated $0.5 million in stock, and David Costen Haley’s HBK Investments was right behind this move, as the fund dropped about $0.3 million worth of shares.

Let’s also examine hedge fund activity in other stocks similar to Exterran Corp (NYSE:EXTN). These stocks are CoBiz Financial Inc (NASDAQ:COBZ), Student Transportation Inc (NASDAQ:STB), First Trust High Income Long/short Fund (NYSE:FSD), and Rudolph Technologies Inc (NYSE:RTEC). This group of stocks’ market valuations resemble EXTN’s market valuation.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $106 million in EXTN’s case. Rudolph Technologies Inc (NYSE:RTEC) is the most popular stock in this table. On the other hand First Trust High Income Long/short Fund (NYSE:FSD) is the least popular one with only 3 bullish hedge fund positions. Exterran Corp (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. In this regard RTEC might be a better candidate to consider taking a long position in.

Disclosure: None