Is Hornbeck Offshore Services, Inc. (HOS) Going to Burn These Hedge Funds?

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.

Is Hornbeck Offshore Services, Inc. (NYSE:HOS) a bargain? Prominent investors are getting less optimistic. The number of long hedge fund positions experienced a decline of 1 in recent months. There were 15 hedge funds in our database with HOS holdings at the end of the previous quarter. At the end of this article we will also compare HOS to other stocks including Peapack-Gladstone Financial Corp (NASDAQ:PGC), Atlantic Power Corp (NYSE:AT), and Grupo Aeroportuario del Centro Nort(ADR) (NASDAQ:OMAB) to get a better sense of its popularity.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year, involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.

Keeping this in mind, we’re going to take a look at the latest action encompassing Hornbeck Offshore Services, Inc. (NYSE:HOS).

How have hedgies been trading Hornbeck Offshore Services, Inc. (NYSE:HOS)?

At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 7% decline from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in HOS at the beginning of this year. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, William C. Martin’s Raging Capital Management has the largest position in Hornbeck Offshore Services, Inc. (NYSE:HOS), worth close to $19.8 million, accounting for 2.7% of its total 13F portfolio. Coming in second is Fine Capital Partners, led by Debra Fine, which holds a $19.6 million position; 2% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that hold long positions comprise Robert Polak’s Anchor Bolt Capital, Jim Simons’ Renaissance Technologies and Gilchrist Berg’s Water Street Capital. We should note that Raging Capital Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Seeing as Hornbeck Offshore Services, Inc. (NYSE:HOS) has witnessed a decline in interest from the smart money, we can see that there exists a select few funds that decided to sell off their positions entirely by the end of the third quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the biggest stake of the 700 funds monitored by Insider Monkey, valued at about $0.5 million in stock, and Jonathan Lennon’s Pleasant Lake Partners was right behind this move, as the fund dumped about $0.4 million worth of HOS shares.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Hornbeck Offshore Services, Inc. (NYSE:HOS) but similarly valued. We will take a look at Peapack-Gladstone Financial Corp (NASDAQ:PGC), Atlantic Power Corp (NYSE:AT), Grupo Aeroportuario del Centro Nort(ADR) (NASDAQ:OMAB), and Arlington Asset Investment Corp (NYSE:AI). This group of stocks’ market caps are similar to HOS’s market cap.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $78 million in HOS’s case. Atlantic Power Corp (NYSE:AT) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Centro Nort(ADR) (NASDAQ:OMAB) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Hornbeck Offshore Services, Inc. (NYSE:HOS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None