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Is Forum Energy Technologies Inc (FET) Burning These Hedge Funds ?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Forum Energy Technologies Inc (NYSE:FET).

Forum Energy Technologies Inc (NYSE:FET) shareholders have witnessed an increase in hedge fund interest recently. FET was in 19 hedge funds’ portfolios at the end of June. There were 16 hedge funds in our database with FET positions at the end of the previous quarter. Our calculations also showed that FET isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

According to most shareholders, hedge funds are perceived as slow, outdated investment tools of yesteryear. While there are greater than 8000 funds trading at the moment, Our experts hone in on the bigwigs of this club, around 750 funds. These money managers handle most of the hedge fund industry’s total capital, and by watching their finest stock picks, Insider Monkey has determined several investment strategies that have historically outstripped the broader indices. Insider Monkey’s flagship hedge fund strategy beat the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

Dmitry Balyasny

UIn addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources  like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. We’re going to take a peek at the latest hedge fund action surrounding Forum Energy Technologies Inc (NYSE:FET).

What have hedge funds been doing with Forum Energy Technologies Inc (NYSE:FET)?

At the end of the second quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards FET over the last 16 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

FET_oct2019

The largest stake in Forum Energy Technologies Inc (NYSE:FET) was held by Millennium Management, which reported holding $18.4 million worth of stock at the end of March. It was followed by Perella Weinberg Partners with a $17.1 million position. Other investors bullish on the company included Citadel Investment Group, Balyasny Asset Management, and D E Shaw.

With a general bullishness amongst the heavyweights, key money managers have jumped into Forum Energy Technologies Inc (NYSE:FET) headfirst. Perella Weinberg Partners assembled the most valuable position in Forum Energy Technologies Inc (NYSE:FET). Perella Weinberg Partners had $17.1 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron’s Algert Coldiron Investors also initiated a $0.8 million position during the quarter. The other funds with new positions in the stock are Cliff Asness’s AQR Capital Management, Noam Gottesman’s GLG Partners, and Michael Gelband’s ExodusPoint Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Forum Energy Technologies Inc (NYSE:FET) but similarly valued. We will take a look at Orchid Island Capital, Inc. (NYSE:ORC), the Rubicon Project, Inc. (NYSE:RUBI), Unifi, Inc. (NYSE:UFI), and Forterra, Inc. (NASDAQ:FRTA). All of these stocks’ market caps match FET’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ORC 4 8289 1
RUBI 16 52094 -9
UFI 12 68862 1
FRTA 11 50740 -1
Average 10.75 44996 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $58 million in FET’s case. The Rubicon Project Inc (NYSE:RUBI) is the most popular stock in this table. On the other hand Orchid Island Capital, Inc. (NYSE:ORC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Forum Energy Technologies Inc (NYSE:FET) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately FET wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FET were disappointed as the stock returned -54.7% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.

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

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