Hedge Funds Are Selling Exterran Corporation (EXTN)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Exterran Corporation (NYSE:EXTN) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is Exterran Corporation (NYSE:EXTN) a great investment today? The best stock pickers are in a bearish mood. The number of bullish hedge fund bets retreated by 1 lately. Our calculations also showed that extn isn’t among the 30 most popular stocks among hedge funds. EXTN was in 19 hedge funds’ portfolios at the end of the third quarter of 2018. There were 20 hedge funds in our database with EXTN holdings at the end of the previous quarter.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Clint Carlson, Carlson Capital

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

Hedge fund activity in Exterran Corporation (NYSE:EXTN)

Heading into the fourth quarter of 2018, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from one quarter earlier. By comparison, 24 hedge funds held shares or bullish call options in EXTN heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with EXTN Positions

More specifically, Magnetar Capital was the largest shareholder of Exterran Corporation (NYSE:EXTN), with a stake worth $58.1 million reported as of the end of September. Trailing Magnetar Capital was Cannell Capital, which amassed a stake valued at $15.6 million. Carlson Capital, Millennium Management, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.

Seeing as Exterran Corporation (NYSE:EXTN) has experienced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there was a specific group of hedge funds that elected to cut their entire stakes by the end of the third quarter. It’s worth mentioning that Joel Greenblatt’s Gotham Asset Management cut the largest position of all the hedgies followed by Insider Monkey, valued at close to $1.7 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund cut about $0.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 1 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Exterran Corporation (NYSE:EXTN) but similarly valued. We will take a look at Nuveen Preferred Income Opportunities Fund (NYSE:JPC), United Insurance Holdings Corp. (NASDAQ:UIHC), Venator Materials PLC (NYSE:VNTR), and Banc of California, Inc. (NYSE:BANC). All of these stocks’ market caps match EXTN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JPC 2 375 -1
UIHC 4 11931 -2
VNTR 19 186079 3
BANC 15 99681 -1
Average 10 74517 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $118 million in EXTN’s case. Venator Materials PLC (NYSE:VNTR) is the most popular stock in this table. On the other hand Nuveen Preferred Income Opportunities Fund (NYSE:JPC) is the least popular one with only 2 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. In this regard VNTR might be a better candidate to consider a long position.

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