Hedge Funds Never Been Less Bullish On Patterson-UTI Energy, Inc. (PTEN)

In this article we will check out the progression of hedge fund sentiment towards Patterson-UTI Energy, Inc. (NASDAQ:PTEN) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Patterson-UTI Energy, Inc. (NASDAQ:PTEN) has experienced a decrease in enthusiasm from smart money lately. Our calculations also showed that PTEN 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 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.

Jonathan Barrett Luminus Management

Jonathan Barrett of Luminus Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. 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 take a glance at the new hedge fund action regarding Patterson-UTI Energy, Inc. (NASDAQ:PTEN).

What have hedge funds been doing with Patterson-UTI Energy, Inc. (NASDAQ:PTEN)?

At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PTEN over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

The largest stake in Patterson-UTI Energy, Inc. (NASDAQ:PTEN) was held by Renaissance Technologies, which reported holding $29.5 million worth of stock at the end of September. It was followed by AQR Capital Management with a $11.2 million position. Other investors bullish on the company included Kahn Brothers, Two Sigma Advisors, and Luminus Management. In terms of the portfolio weights assigned to each position Kahn Brothers allocated the biggest weight to Patterson-UTI Energy, Inc. (NASDAQ:PTEN), around 1.3% of its 13F portfolio. Luminus Management is also relatively very bullish on the stock, earmarking 0.4 percent of its 13F equity portfolio to PTEN.

Because Patterson-UTI Energy, Inc. (NASDAQ:PTEN) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there is a sect of hedgies that slashed their entire stakes by the end of the first quarter. Interestingly, Steve Cohen’s Point72 Asset Management sold off the biggest stake of all the hedgies monitored by Insider Monkey, worth an estimated $15.7 million in stock. Ron Gutfleish’s fund, Elm Ridge Capital, also dropped its stock, about $4.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 9 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks similar to Patterson-UTI Energy, Inc. (NASDAQ:PTEN). We will take a look at UMH Properties, Inc (NYSE:UMH), Morphic Holding, Inc. (NASDAQ:MORF), Zumiez Inc. (NASDAQ:ZUMZ), and CBTX, Inc. (NASDAQ:CBTX). All of these stocks’ market caps are similar to PTEN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UMH 5 4615 1
MORF 7 54095 3
ZUMZ 22 28267 -2
CBTX 10 7008 2
Average 11 23496 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $70 million in PTEN’s case. Zumiez Inc. (NASDAQ:ZUMZ) is the most popular stock in this table. On the other hand UMH Properties, Inc (NYSE:UMH) is the least popular one with only 5 bullish hedge fund positions. Patterson-UTI Energy, Inc. (NASDAQ:PTEN) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.2% in 2020 through June 17th but still beat the market by 14.8 percentage points. Hedge funds were also right about betting on PTEN as the stock returned 86.8% in Q2 (through June 17th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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