Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Schlumberger Limited. (NYSE:SLB) to find out whether there were any major changes in hedge funds’ views.
Is Schlumberger (SLB) stock a buy or sell? The smart money was getting less optimistic. The number of long hedge fund bets decreased by 3 lately. Schlumberger Limited. (NYSE:SLB) was in 50 hedge funds’ portfolios at the end of December. The all time high for this statistic is 61. Our calculations also showed that SLB isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 53 hedge funds in our database with SLB holdings at the end of September.
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 124 percentage points since March 2017 (see the details here).
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock that will deliver a 10x return. 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 homepage (or at the end of this article).With all of this in mind let’s take a gander at the new hedge fund action surrounding Schlumberger Limited. (NYSE:SLB).
Do Hedge Funds Think SLB Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the previous quarter. On the other hand, there were a total of 47 hedge funds with a bullish position in SLB a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of Schlumberger Limited. (NYSE:SLB), with a stake worth $308.5 million reported as of the end of December. Trailing Fisher Asset Management was D E Shaw, which amassed a stake valued at $165.5 million. Citadel Investment Group, Two Sigma Advisors, 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 Impala Asset Management allocated the biggest weight to Schlumberger Limited. (NYSE:SLB), around 2.85% of its 13F portfolio. Encompass Capital Advisors is also relatively very bullish on the stock, dishing out 2.68 percent of its 13F equity portfolio to SLB.
Seeing as Schlumberger Limited. (NYSE:SLB) has experienced bearish sentiment from the smart money, logic holds that there lies a certain “tier” of funds who were dropping their positions entirely by the end of the fourth quarter. At the top of the heap, Brandon Haley’s Holocene Advisors said goodbye to the largest position of the 750 funds tracked by Insider Monkey, comprising about $34.3 million in stock. Anand Parekh’s fund, Alyeska Investment Group, also said goodbye to its stock, about $15.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 3 funds by the end of the fourth quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Schlumberger Limited. (NYSE:SLB) but similarly valued. These stocks are Copart, Inc. (NASDAQ:CPRT), Datadog, Inc. (NASDAQ:DDOG), Chunghwa Telecom Co., Ltd (NYSE:CHT), PACCAR Inc (NASDAQ:PCAR), Bilibili Inc. (NASDAQ:BILI), Eversource Energy (NYSE:ES), and Public Service Enterprise Group Incorporated (NYSE:PEG). This group of stocks’ market valuations are closest to SLB’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 33.6 hedge funds with bullish positions and the average amount invested in these stocks was $1226 million. That figure was $1226 million in SLB’s case. Datadog, Inc. (NASDAQ:DDOG) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (NYSE:CHT) is the least popular one with only 5 bullish hedge fund positions. Schlumberger Limited. (NYSE:SLB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SLB is 74.5. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on SLB as the stock returned 24.5% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.