Hedge Funds Are Selling National Energy Services Reunited Corp. (NESR)

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 at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of National Energy Services Reunited Corp. (NASDAQ:NESR).

Is National Energy Services Reunited Corp. (NASDAQ:NESR) a buy right now? Investors who are in the know are reducing their bets on the stock. The number of bullish hedge fund positions went down by 3 in recent months. Our calculations also showed that NESR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). NESR was in 5 hedge funds’ portfolios at the end of March. There were 8 hedge funds in our database with NESR holdings at the end of the previous quarter.

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

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s check out the recent hedge fund action surrounding National Energy Services Reunited Corp. (NASDAQ:NESR).

How are hedge funds trading National Energy Services Reunited Corp. (NASDAQ:NESR)?

At Q1’s end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -38% from one quarter earlier. By comparison, 8 hedge funds held shares or bullish call options in NESR a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in National Energy Services Reunited Corp. (NASDAQ:NESR) was held by Encompass Capital Advisors, which reported holding $16.2 million worth of stock at the end of September. It was followed by Balyasny Asset Management with a $0.7 million position. Other investors bullish on the company included Diametric Capital, 683 Capital Partners, and Springbok Capital. In terms of the portfolio weights assigned to each position Encompass Capital Advisors allocated the biggest weight to National Energy Services Reunited Corp. (NASDAQ:NESR), around 1.74% of its 13F portfolio. Diametric Capital is also relatively very bullish on the stock, dishing out 0.31 percent of its 13F equity portfolio to NESR.

Due to the fact that National Energy Services Reunited Corp. (NASDAQ:NESR) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedge funds who were dropping their entire stakes by the end of the first quarter. It’s worth mentioning that Vince Maddi and Shawn Brennan’s SIR Capital Management dumped the biggest investment of all the hedgies monitored by Insider Monkey, comprising an estimated $0.6 million in stock, and Israel Englander’s Millennium 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 3 funds by the end of the first quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as National Energy Services Reunited Corp. (NASDAQ:NESR) but similarly valued. These stocks are China Yuchai International Limited (NYSE:CYD), HarborOne Bancorp, Inc. (NASDAQ:HONE), Interface, Inc. (NASDAQ:TILE), and Donegal Group Inc (NASDAQ:DGICA). This group of stocks’ market caps are closest to NESR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CYD 6 50209 0
HONE 12 28959 -1
TILE 15 17906 -5
DGICA 5 10086 0
Average 9.5 26790 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $18 million in NESR’s case. Interface, Inc. (NASDAQ:TILE) is the most popular stock in this table. On the other hand Donegal Group Inc (NASDAQ:DGICA) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks National Energy Services Reunited Corp. (NASDAQ:NESR) is even less popular than DGICA. Hedge funds dodged a bullet by taking a bearish stance towards NESR. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately NESR wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); NESR investors were disappointed as the stock returned 11.8% during the second quarter (through the end of May) 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 so far in 2020.

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