Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Exterran Corporation (NYSE:EXTN), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is EXTN a good stock to buy now? Exterran Corporation (NYSE:EXTN) has experienced a decrease in activity from the world’s largest hedge funds lately. Exterran Corporation (NYSE:EXTN) was in 11 hedge funds’ portfolios at the end of September. The all time high for this statistics is 24. There were 14 hedge funds in our database with EXTN positions at the end of the second quarter. Our calculations also showed that EXTN isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 66 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to view the latest hedge fund action regarding Exterran Corporation (NYSE:EXTN).
Do Hedge Funds Think EXTN Is A Good Stock To Buy Now?
At the end of September, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in EXTN over the last 21 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Phill Gross and Robert Atchinson’s Adage Capital Management has the biggest position in Exterran Corporation (NYSE:EXTN), worth close to $1.9 million, comprising less than 0.1%% of its total 13F portfolio. On Adage Capital Management’s heels is D E Shaw, led by D. E. Shaw, holding a $1.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers with similar optimism include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Renaissance Technologies and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Southport Management allocated the biggest weight to Exterran Corporation (NYSE:EXTN), around 1.5% of its 13F portfolio. Adage Capital Management is also relatively very bullish on the stock, setting aside 0.0047 percent of its 13F equity portfolio to EXTN.
Judging by the fact that Exterran Corporation (NYSE:EXTN) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there were a few hedgies that elected to cut their entire stakes heading into Q4. Interestingly, J. Carlo Cannell’s Cannell Capital cut the biggest position of the 750 funds monitored by Insider Monkey, totaling close to $5.4 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund cut about $0.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 3 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Exterran Corporation (NYSE:EXTN) but similarly valued. We will take a look at Synchronoss Technologies, Inc. (NASDAQ:SNCR), Shore Bancshares, Inc. (NASDAQ:SHBI), Surgalign Holdings, Inc. (NASDAQ:SRGA), Strongbridge Biopharma plc (NASDAQ:SBBP), Tanzanian Gold Corporation (NYSE:TRX), Fonar Corporation (NASDAQ:FONR), and BELLUS Health Inc. (NASDAQ:BLU). This group of stocks’ market valuations resemble EXTN’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.9 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $7 million in EXTN’s case. Surgalign Holdings, Inc. (NASDAQ:SRGA) is the most popular stock in this table. On the other hand Tanzanian Gold Corporation (NYSE:TRX) is the least popular one with only 2 bullish hedge fund positions. Exterran Corporation (NYSE:EXTN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EXTN is 56.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on EXTN as the stock returned 13.2% since the end of Q3 (through 12/8) 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.