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Hedge Funds Cashing Out of Hi-Crush Inc. (HCR)

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Hi-Crush Inc. (NYSE:HCR) based on that data.

Hi-Crush Inc. (NYSE:HCR) has seen a decrease in hedge fund sentiment recently. HCR was in 3 hedge funds’ portfolios at the end of the first quarter of 2020. There were 5 hedge funds in our database with HCR holdings at the end of the previous quarter. Our calculations also showed that HCR 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).

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 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 S&P 500 ETFs by 44 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 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.

William Harnisch

William Harnisch of Peconic Partners LLC

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the new hedge fund action regarding Hi-Crush Inc. (NYSE:HCR).

What have hedge funds been doing with Hi-Crush Inc. (NYSE:HCR)?

At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -40% from the previous quarter. On the other hand, there were a total of 4 hedge funds with a bullish position in HCR a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is HCR A Good Stock To Buy?

 

Among these funds, Renaissance Technologies held the most valuable stake in Hi-Crush Inc. (NYSE:HCR), which was worth $0.7 million at the end of the third quarter. On the second spot was Prescott Group Capital Management which amassed $0 million worth of shares. Citadel Investment Group was 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 Prescott Group Capital Management allocated the biggest weight to Hi-Crush Inc. (NYSE:HCR), around 0.02% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.0007 percent of its 13F equity portfolio to HCR.

Judging by the fact that Hi-Crush Inc. (NYSE:HCR) has experienced falling interest from the entirety of the hedge funds we track, we can see that there exists a select few hedgies who were dropping their entire stakes last quarter. At the top of the heap, Israel Englander’s Millennium Management said goodbye to the biggest stake of all the hedgies monitored by Insider Monkey, totaling an estimated $0.1 million in stock, and William Harnisch’s Peconic Partners LLC was right behind this move, as the fund dropped about $0 million worth. These transactions are important to note, as total hedge fund interest fell by 2 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Hi-Crush Inc. (NYSE:HCR) but similarly valued. These stocks are Newater Technology, Inc. (NASDAQ:NEWA), Allena Pharmaceuticals, Inc. (NASDAQ:ALNA), Broadwind Energy Inc. (NASDAQ:BWEN), and Gridsum Holding Inc. (NASDAQ:GSUM). This group of stocks’ market values match HCR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NEWA 1 31 0
ALNA 7 4922 2
BWEN 3 1292 0
GSUM 5 4309 0
Average 4 2639 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $1 million in HCR’s case. Allena Pharmaceuticals, Inc. (NASDAQ:ALNA) is the most popular stock in this table. On the other hand Newater Technology, Inc. (NASDAQ:NEWA) is the least popular one with only 1 bullish hedge fund positions. Hi-Crush Inc. (NYSE:HCR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and surpassed the market by 15.6 percentage points. Unfortunately HCR wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); HCR investors were disappointed as the stock returned 12.5% during the second quarter 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 in 2020.

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