The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Patterson-UTI Energy, Inc. (NASDAQ:PTEN) from the perspective of those elite funds.
Patterson-UTI Energy, Inc. (NASDAQ:PTEN) has seen a decrease in hedge fund sentiment in recent months. PTEN was in 23 hedge funds’ portfolios at the end of September. There were 30 hedge funds in our database with PTEN 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 Enstar Group Ltd. (NASDAQ:ESGR), CNO Financial Group Inc (NYSE:CNO), and Piedmont Office Realty Trust, Inc. (NYSE:PDM) 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.
How have hedgies been trading Patterson-UTI Energy, Inc. (NASDAQ:PTEN)?
At the end of the third quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 23% drop from the previous quarter, pushing ownership of the stock among hedgies to its lowest level in a year. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the most valuable position in Patterson-UTI Energy, Inc. (NASDAQ:PTEN). Citadel Investment Group has a $70.2 million position in the stock. Sitting at the No. 2 spot is First Pacific Advisors LLC, led by Robert Rodriguez and Steven Romick, holding a $67.2 million position. Other members of the smart money that are bullish contain Cliff Asness’ AQR Capital Management, Irving Kahn’s Kahn Brothers and Ron Gutfleish’s Elm Ridge Capital.
Due to the fact that Patterson-UTI Energy, Inc. (NASDAQ:PTEN) has experienced a decline in interest from hedge fund managers, logic holds that there were a few fund managers who sold off their full holdings heading into Q4. Interestingly, Charles Clough’s Clough Capital Partners sold off the biggest position of all the hedgies monitored by Insider Monkey, worth an estimated $6.3 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also dropped its stock, about $5.6 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 7 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to Patterson-UTI Energy, Inc. (NASDAQ:PTEN). We will take a look at Enstar Group Ltd. (NASDAQ:ESGR), CNO Financial Group Inc (NYSE:CNO), Piedmont Office Realty Trust, Inc. (NYSE:PDM), and Sibanye Gold Ltd (ADR) (NYSE:SBGL). All of these stocks’ market caps are similar to PTEN’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $231 million. That figure was $278 million in PTEN’s case. CNO Financial Group Inc (NYSE:CNO) is the most popular stock in this table. On the other hand Sibanye Gold Ltd (ADR) (NYSE:SBGL) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Patterson-UTI Energy, Inc. (NASDAQ:PTEN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio, bearing in mind the steep drop in ownership last quarter.