Hedge Funds Never Been Less Bullish On U.S. Well Services, Inc. (USWS)

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded U.S. Well Services, Inc. (NASDAQ:USWS) based on those filings.

Is U.S. Well Services, Inc. (NASDAQ:USWS) the right investment to pursue these days? Money managers are in a bearish mood. The number of long hedge fund bets were trimmed by 2 in recent months. Our calculations also showed that USWS 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.


Howard Marks of Oaktree Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s review the fresh hedge fund action encompassing U.S. Well Services, Inc. (NASDAQ:USWS).

How have hedgies been trading U.S. Well Services, Inc. (NASDAQ:USWS)?

At the end of the first quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in USWS over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

More specifically, Encompass Capital Advisors was the largest shareholder of U.S. Well Services, Inc. (NASDAQ:USWS), with a stake worth $0.6 million reported as of the end of September. Trailing Encompass Capital Advisors was Angelo Gordon & Co, which amassed a stake valued at $0.2 million. Paloma Partners, Renaissance Technologies, and Oaktree Capital Management were 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 Encompass Capital Advisors allocated the biggest weight to U.S. Well Services, Inc. (NASDAQ:USWS), around 0.06% of its 13F portfolio. Sound Point Capital is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to USWS.

Since U.S. Well Services, Inc. (NASDAQ:USWS) has experienced falling interest from hedge fund managers, we can see that there is a sect of hedge funds who sold off their entire stakes by the end of the first quarter. At the top of the heap, Clint Carlson’s Carlson Capital said goodbye to the biggest position of the 750 funds followed by Insider Monkey, comprising an estimated $0.2 million in stock. Israel Englander’s fund, Millennium Management, also dropped its stock, about $0 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 2 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as U.S. Well Services, Inc. (NASDAQ:USWS) but similarly valued. These stocks are Rubicon Technology, Inc. (NASDAQ:RBCN), Luby’s, Inc. (NYSE:LUB), Wireless Telecom Group, Inc. (NYSE:WTT), and Kewaunee Scientific Corporation (NASDAQ:KEQU). This group of stocks’ market caps resemble USWS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RBCN 3 3438 0
LUB 3 2388 0
WTT 2 991 0
KEQU 3 1614 0
Average 2.75 2108 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 2.75 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $1 million in USWS’s case. Rubicon Technology, Inc. (NASDAQ:RBCN) is the most popular stock in this table. On the other hand Wireless Telecom Group, Inc. (NYSE:WTT) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks U.S. Well Services, Inc. (NASDAQ:USWS) is more popular among hedge funds. 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 returned 12.2% in 2020 through June 17th but still managed to beat the market by 14.8 percentage points. Hedge funds were also right about betting on USWS as the stock returned 83.3% so far in Q2 (through June 17th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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