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Hedge Funds Have Never Been More Bullish On Select Energy Services, Inc. (WTTR)

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 March 31 holdings, data that is available nowhere else. Should you consider Select Energy Services, Inc. (NYSE:WTTR) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Select Energy Services, Inc. (NYSE:WTTR) has seen an increase in activity from the world’s largest hedge funds lately. Our calculations also showed that WTTR isn’t among the 30 most popular stocks among hedge funds.

If you’d ask most market participants, hedge funds are viewed as slow, old investment tools of yesteryear. While there are more than 8000 funds with their doors open at present, We choose to focus on the masters of this group, approximately 750 funds. These investment experts have their hands on most of the hedge fund industry’s total capital, and by tailing their best stock picks, Insider Monkey has come up with many investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by around 5 percentage points a year since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).

GOTHAM ASSET MANAGEMENT

We’re going to analyze the new hedge fund action surrounding Select Energy Services, Inc. (NYSE:WTTR).

How have hedgies been trading Select Energy Services, Inc. (NYSE:WTTR)?

Heading into the second quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in WTTR a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

WTTR_jun2019

The largest stake in Select Energy Services, Inc. (NYSE:WTTR) was held by Adage Capital Management, which reported holding $24 million worth of stock at the end of March. It was followed by Arosa Capital Management with a $14.3 million position. Other investors bullish on the company included SCW Capital Management, Encompass Capital Advisors, and Citadel Investment Group.

Consequently, key hedge funds have jumped into Select Energy Services, Inc. (NYSE:WTTR) headfirst. SCW Capital Management, managed by John R. Wagner, assembled the largest position in Select Energy Services, Inc. (NYSE:WTTR). SCW Capital Management had $11.1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $0.5 million investment in the stock during the quarter. The following funds were also among the new WTTR investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Hoon Kim’s Quantinno Capital, and Joel Greenblatt’s Gotham Asset Management.

Let’s now review hedge fund activity in other stocks similar to Select Energy Services, Inc. (NYSE:WTTR). These stocks are U.S. Silica Holdings Inc (NYSE:SLCA), Archrock, Inc. (NYSE:AROC), Masonite International Corp (NYSE:DOOR), and Pitney Bowes Inc. (NYSE:PBI). This group of stocks’ market caps are closest to WTTR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SLCA 14 300930 0
AROC 16 39106 -4
DOOR 21 245812 2
PBI 24 104429 4
Average 18.75 172569 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $173 million. That figure was $65 million in WTTR’s case. Pitney Bowes Inc. (NYSE:PBI) is the most popular stock in this table. On the other hand U.S. Silica Holdings Inc (NYSE:SLCA) is the least popular one with only 14 bullish hedge fund positions. Select Energy Services, Inc. (NYSE:WTTR) 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately WTTR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); WTTR investors were disappointed as the stock returned -0.2% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.

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

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