Is Flotek Industries (FTK) a Smart Long-term Buy?

Artko Capital recently released its Q3 2020 Investor Letter, a copy of which you can download here. The fund posted a return of 22.0% for the quarter, outperforming its benchmark, the S&P 500 Index which returned 8.9% in the same quarter. You should check out Artko Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.

In the said letter, Artko Capital highlighted a few stocks and Flotek Industries Inc (NYSE:FTK) is one of them. Flotek Industries Inc (NYSE:FTK) manufactures and markets downhole equipment and specialty chemicals. Year-to-date, Flotek Industries Inc (NYSE:FTK) stock gained 31% and on November 6th it had a closing price of $2.61. Here is what Artko Capital said:

“Flotek (FTK) – Our biggest contributor to our performance this quarter has been our position in Flotek. While our original thesis last year was based on a market cap significantly below cash cheapness as well as optionality on recovery of oil services or liquidation, with the double whammy of the pandemic and a collapse of the oil markets the stock fell to below $0.70 or 40% of its liquidation value in March 2020. While March was a scary time to put money to work in most of our names, we felt confident with our margin of safety in Flotek and added heavily to our position to make it around 11% of the portfolio and lower our dollar cost average price to around $1.65.

In the six months since, the company’s CEO, John Gibson, has righted the ship by significantly cutting the fixed cost base and acquiring a petrochemical data services company JP3. Additionally, with the oil services chemical business remaining a shadow of its former self the company has been able to pivot its production facilities to making … hand sanitizer. With the excitement of the new, reputable CEO; a successful transaction and a small rebound in oil production in the 3rd quarter of 2020 the company’s insiders have begun to purchase significant quantities of shares on the open market with the euphoria sending the shares to over $3.00 or 330% from the stocks’ March lows and over 80% since our purchase a year ago. While we remain significant fans of Mr. Gibson, his direction as well as his compensation plan which mostly kicks in above $7.00 per share, having a 20%+ position in a single name oil services firm was significantly above our internal risk management threshold and we sold close to 2/3 of our position at an average price of $2.85 in the 3rd quarter and October 2020 booking a 70% realized profit and reducing the position to around 7% of the portfolio at the writing of this letter.”

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In August, we published an article revealing Artko Capital bullish investment thesis on Flotek Industries Inc (NYSE:FTK) stock in its Q2 2020 investor letter. This suggests that the investment firm has been bullish for a long time on Flotek Industries Inc (NYSE:FTK).

In Q1 2020, the number of bullish hedge fund positions on Flotek Industries Inc (NYSE:FTK) stock decreased by about 11% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t believe in Flotek’s growth potential. Our calculations showed that Flotek Industries Inc (NYSE:FTK) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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