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Is Civeo Corporation (CVEO) Going to Burn These Hedge Funds?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Civeo Corporation (NYSE:CVEO) and determine whether hedge funds skillfully traded this stock.

Civeo Corporation (NYSE:CVEO) was in 12 hedge funds’ portfolios at the end of March. CVEO investors should pay attention to a decrease in enthusiasm from smart money in recent months. There were 18 hedge funds in our database with CVEO holdings at the end of the previous quarter. Our calculations also showed that CVEO 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 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 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.

RENAISSANCE TECHNOLOGIES

Jim Simons Founder of Renaissance Technologies

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. 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. With all of this in mind let’s take a gander at the recent hedge fund action surrounding Civeo Corporation (NYSE:CVEO).

What does smart money think about Civeo Corporation (NYSE:CVEO)?

At Q1’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in CVEO a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Civeo Corporation (NYSE:CVEO) was held by Horizon Asset Management, which reported holding $17.5 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $4.2 million position. Other investors bullish on the company included Prescott Group Capital Management, DC Capital Partners, and Cloverdale Capital Management. In terms of the portfolio weights assigned to each position DC Capital Partners allocated the biggest weight to Civeo Corporation (NYSE:CVEO), around 8.24% of its 13F portfolio. Prescott Group Capital Management is also relatively very bullish on the stock, designating 1.75 percent of its 13F equity portfolio to CVEO.

Since Civeo Corporation (NYSE:CVEO) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there was a specific group of hedgies who were dropping their entire stakes in the first quarter. Intriguingly, Seth Fischer’s Oasis Management sold off the largest investment of all the hedgies tracked by Insider Monkey, comprising about $1.9 million in stock. Bradley Louis Radoff’s fund, Fondren Management, also sold off its stock, about $1.5 million worth. These transactions are important to note, as total hedge fund interest was cut by 6 funds in the first quarter.

Let’s also examine hedge fund activity in other stocks similar to Civeo Corporation (NYSE:CVEO). These stocks are Epsilon Energy Ltd. (NASDAQ:EPSN), The Goldfield Corporation (NYSE:GV), VOXX International Corp (NASDAQ:VOXX), and SharpSpring, Inc. (NASDAQ:SHSP). This group of stocks’ market valuations match CVEO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EPSN 1 7076 0
GV 1 5373 0
VOXX 7 14898 -1
SHSP 5 16408 -2
Average 3.5 10939 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.5 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $28 million in CVEO’s case. VOXX International Corp (NASDAQ:VOXX) is the most popular stock in this table. On the other hand Epsilon Energy Ltd. (NASDAQ:EPSN) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Civeo Corporation (NYSE:CVEO) 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 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on CVEO as the stock returned 49.8% in Q2 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.