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Hedge Funds Are Warming Up To Liberty Oilfield Services Inc. (LBRT)

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Liberty Oilfield Services Inc. (NYSE:LBRT).

Liberty Oilfield Services Inc. (NYSE:LBRT) shareholders have witnessed an increase in hedge fund sentiment recently. Our calculations also showed that LBRT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are many gauges investors employ to size up stocks. A pair of the most underrated gauges are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the best fund managers can trounce the broader indices by a healthy amount (see the details here).

AQR CAPITAL MANAGEMENT

Cliff Asness of AQR Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy  based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s view the fresh hedge fund action regarding Liberty Oilfield Services Inc. (NYSE:LBRT).

How are hedge funds trading Liberty Oilfield Services Inc. (NYSE:LBRT)?

At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 71% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LBRT over the last 17 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

The largest stake in Liberty Oilfield Services Inc. (NYSE:LBRT) was held by GMT Capital, which reported holding $22.6 million worth of stock at the end of September. It was followed by Adage Capital Management with a $4.3 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and Balyasny Asset Management. In terms of the portfolio weights assigned to each position Lyon Street Capital allocated the biggest weight to Liberty Oilfield Services Inc. (NYSE:LBRT), around 1% of its 13F portfolio. GMT Capital is also relatively very bullish on the stock, designating 0.83 percent of its 13F equity portfolio to LBRT.

As one would reasonably expect, key hedge funds were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, assembled the most outsized position in Liberty Oilfield Services Inc. (NYSE:LBRT). Citadel Investment Group had $3.4 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $2 million investment in the stock during the quarter. The other funds with new positions in the stock are Cliff Asness’s AQR Capital Management, Brian C. Freckmann’s Lyon Street Capital, and Renaissance Technologies.

Let’s check out hedge fund activity in other stocks similar to Liberty Oilfield Services Inc. (NYSE:LBRT). We will take a look at Criteo SA (NASDAQ:CRTO), Oxford Industries, Inc. (NYSE:OXM), Summit Hotel Properties Inc (NYSE:INN), and Guess’, Inc. (NYSE:GES). This group of stocks’ market caps resemble LBRT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CRTO 12 170445 3
OXM 14 75460 1
INN 15 31264 3
GES 17 84122 2
Average 14.5 90323 2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $36 million in LBRT’s case. Guess’, Inc. (NYSE:GES) is the most popular stock in this table. On the other hand Criteo SA (NASDAQ:CRTO) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Liberty Oilfield Services Inc. (NYSE:LBRT) is even less popular than CRTO. Hedge funds dodged a bullet by taking a bearish stance towards LBRT. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately LBRT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); LBRT investors were disappointed as the stock returned -18.4% 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 70 percent of these stocks already outperformed the market so far in Q4.

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

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