Is Helix Energy Solutions Group Inc. (HLX) A Good Stock To Buy?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have gone over 730 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 28th. In this article we look at what those investors think of Helix Energy Solutions Group Inc. (NYSE:HLX).

Helix Energy Solutions Group Inc. (NYSE:HLX) shareholders have witnessed a decrease in activity from the world’s largest hedge funds lately. HLX was in 11 hedge funds’ portfolios at the end of June. There were 16 hedge funds in our database with HLX positions at the end of the previous quarter. Our calculations also showed that HLX 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.

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 market by 40 percentage points since May 2014 through May 30, 2019 (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 our short portfolio.

John Overdeck of Two Sigma

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s view the key hedge fund action regarding Helix Energy Solutions Group Inc. (NYSE:HLX).

What does smart money think about Helix Energy Solutions Group Inc. (NYSE:HLX)?

At Q2’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -31% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HLX over the last 16 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

No of Hedge Funds with HLX Positions

Among these funds, Millennium Management held the most valuable stake in Helix Energy Solutions Group Inc. (NYSE:HLX), which was worth $53.9 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $33 million worth of shares. Moreover, Balyasny Asset Management, D E Shaw, and Two Sigma Advisors were also bullish on Helix Energy Solutions Group Inc. (NYSE:HLX), allocating a large percentage of their portfolios to this stock.

Due to the fact that Helix Energy Solutions Group Inc. (NYSE:HLX) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there exists a select few funds that decided to sell off their positions entirely in the second quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the biggest position of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $4.9 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dumped its stock, about $2.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 5 funds in the second quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Helix Energy Solutions Group Inc. (NYSE:HLX) but similarly valued. We will take a look at Altus Midstream Company (NASDAQ:ALTM), Kite Realty Group Trust (NYSE:KRG), Nexa Resources S.A. (NYSE:NEXA), and OceanFirst Financial Corp. (NASDAQ:OCFC). This group of stocks’ market values are similar to HLX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALTM 7 20619 1
KRG 6 53962 0
NEXA 9 10148 -2
OCFC 13 64180 0
Average 8.75 37227 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $97 million in HLX’s case. OceanFirst Financial Corp. (NASDAQ:OCFC) is the most popular stock in this table. On the other hand Kite Realty Group Trust (NYSE:KRG) is the least popular one with only 6 bullish hedge fund positions. Helix Energy Solutions Group Inc. (NYSE:HLX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 HLX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HLX were disappointed as the stock returned -6.6% 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 so far this year.

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