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Hedge Funds Are Getting Burned By FTS International, Inc. (FTSI)

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about FTS International, Inc. (NYSE:FTSI).

Is FTS International, Inc. (NYSE:FTSI) worth your attention right now? Money managers are taking a pessimistic view. The number of long hedge fund bets were cut by 4 recently. Our calculations also showed that FTSI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). FTSI was in 14 hedge funds’ portfolios at the end of the third quarter of 2019. There were 18 hedge funds in our database with FTSI 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.

To most investors, hedge funds are assumed to be unimportant, outdated investment tools of yesteryear. While there are over 8000 funds with their doors open today, Our experts look at the top tier of this club, about 750 funds. Most estimates calculate that this group of people manage bulk of the smart money’s total asset base, and by watching their matchless investments, Insider Monkey has discovered several investment strategies that have historically defeated 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 .

Roger Ibbotson of Zebra 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. We’re going to take a look at the new hedge fund action surrounding FTS International, Inc. (NYSE:FTSI).

Hedge fund activity in FTS International, Inc. (NYSE:FTSI)

At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from the second quarter of 2019. By comparison, 21 hedge funds held shares or bullish call options in FTSI a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

More specifically, AQR Capital Management was the largest shareholder of FTS International, Inc. (NYSE:FTSI), with a stake worth $1.9 million reported as of the end of September. Trailing AQR Capital Management was Arrowstreet Capital, which amassed a stake valued at $1.5 million. DW Partners, Arosa 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 DW Partners allocated the biggest weight to FTS International, Inc. (NYSE:FTSI), around 1.67% of its 13F portfolio. Arosa Capital Management is also relatively very bullish on the stock, dishing out 0.18 percent of its 13F equity portfolio to FTSI.

Due to the fact that FTS International, Inc. (NYSE:FTSI) has faced falling interest from the smart money, it’s easy to see that there is a sect of money managers who were dropping their full holdings last quarter. At the top of the heap, Daniel Gold’s QVT Financial sold off the largest investment of the 750 funds followed by Insider Monkey, valued at close to $4.5 million in stock. Ron Gutfleish’s fund, Elm Ridge Capital, also said goodbye to its stock, about $2.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 4 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to FTS International, Inc. (NYSE:FTSI). We will take a look at Accuray Incorporated (NASDAQ:ARAY), ACNB Corporation (NASDAQ:ACNB), FVCBankcorp, Inc. (NASDAQ:FVCB), and Xinyuan Real Estate Co., Ltd. (NYSE:XIN). This group of stocks’ market caps are similar to FTSI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ARAY 18 49199 1
ACNB 1 3139 0
FVCB 3 9634 1
XIN 5 2420 -2
Average 6.75 16098 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $8 million in FTSI’s case. Accuray Incorporated (NASDAQ:ARAY) is the most popular stock in this table. On the other hand ACNB Corporation (NASDAQ:ACNB) is the least popular one with only 1 bullish hedge fund positions. FTS International, Inc. (NYSE:FTSI) 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 FTSI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FTSI were disappointed as the stock returned -53.6% 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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