It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Newpark Resources Inc (NYSE:NR).
Is Newpark Resources Inc (NYSE:NR) undervalued? It looks like the best stock pickers are getting less bullish. More specifically, the number of bullish hedge fund investments among the funds in our database fell by three between July and September. However, the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as HomeStreet Inc (NASDAQ:HMST), Sapiens International Corporation N.V. (NASDAQ:SPNS), and Silver Bay Realty Trust Corp (NYSE:SBY) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
With all of this in mind, let’s analyze the key action encompassing Newpark Resources Inc (NYSE:NR).
How are hedge funds trading Newpark Resources Inc (NYSE:NR)?
Heading into the fourth quarter of 2016, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock Newpark Resources, down by 20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NR over the last five quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Chuck Royce’s Royce & Associates has the number one position in Newpark Resources Inc (NYSE:NR), worth close to $20.8 million, comprising 0.1% of its total 13F portfolio. The second largest stake is held by Millennium Management, one of the 10 largest hedge funds in the world, which disclosed an $8.9 million position; less than 0.1% of its 13F portfolio is allocated to the company. Some other peers with similar optimism encompass T Boone Pickens’s BP Capital, Bryant Regan’s Lafitte Capital Management, and Jim Simons’ Renaissance Technologies. We should note that BP Capital 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.