Is PUMP A Good Stock To Buy Now?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about ProPetro Holding Corp. (NYSE:PUMP) in this article.

Is PUMP a good stock to buy now? ProPetro Holding Corp. (NYSE:PUMP) has experienced a decrease in hedge fund interest of late. ProPetro Holding Corp. (NYSE:PUMP) was in 17 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 24. There were 18 hedge funds in our database with PUMP positions at the end of the second quarter. Our calculations also showed that PUMP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Phill Gross Adage Capital Phillip Gross

Phillip Gross of Adage Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to check out the fresh hedge fund action regarding ProPetro Holding Corp. (NYSE:PUMP).

Do Hedge Funds Think PUMP Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. By comparison, 22 hedge funds held shares or bullish call options in PUMP a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

More specifically, Fisher Asset Management was the largest shareholder of ProPetro Holding Corp. (NYSE:PUMP), with a stake worth $7 million reported as of the end of September. Trailing Fisher Asset Management was D E Shaw, which amassed a stake valued at $5.8 million. Adage Capital Management, Millennium Management, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to ProPetro Holding Corp. (NYSE:PUMP), around 0.05% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to PUMP.

Since ProPetro Holding Corp. (NYSE:PUMP) has witnessed a decline in interest from the aggregate hedge fund industry, it’s easy to see that there were a few fund managers that elected to cut their full holdings heading into Q4. It’s worth mentioning that Benjamin A. Smith’s Laurion Capital Management dumped the largest stake of the 750 funds watched by Insider Monkey, comprising about $0.5 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also sold off its stock, about $0.3 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 1 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to ProPetro Holding Corp. (NYSE:PUMP). These stocks are Beazer Homes USA, Inc. (NYSE:BZH), Dorian LPG Ltd (NYSE:LPG), International Seaways, Inc. (NYSE:INSW), China Online Education Group (NYSE:COE), CBTX, Inc. (NASDAQ:CBTX), Amryt Pharma plc (NASDAQ:AMYT), and REX American Resources Corp (NYSE:REX). This group of stocks’ market values resemble PUMP’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BZH 15 30587 -4
LPG 14 88313 -1
INSW 15 75625 -4
COE 4 20308 -1
CBTX 8 10588 0
AMYT 4 24862 4
REX 11 38427 2
Average 10.1 41244 -0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.1 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $41 million in PUMP’s case. Beazer Homes USA, Inc. (NYSE:BZH) is the most popular stock in this table. On the other hand China Online Education Group (NYSE:COE) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks ProPetro Holding Corp. (NYSE:PUMP) is more popular among hedge funds. Our overall hedge fund sentiment score for PUMP is 75.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on PUMP as the stock returned 82% since the end of September (through 12/14) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Follow Propetro Holding Corp. (NASDAQ:PUMP)

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