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Is Solaris Oilfield Infrastructure, Inc. (SOI) A Good Stock To Buy?

Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds’ top 20 stock picks easily bested the broader market, at 18.7% compared to 12.1%, despite there being a few duds in there like Berkshire Hathaway (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.

Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) has seen an increase in hedge fund sentiment of late. SOI was in 16 hedge funds’ portfolios at the end of the first quarter of 2019. There were 15 hedge funds in our database with SOI positions at the end of the previous quarter. Our calculations also showed that soi isn’t among the 30 most popular stocks among hedge funds.

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 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.

BlueMountain Capital Management's Returns, AUM and Holdings

Let’s check out the key hedge fund action regarding Solaris Oilfield Infrastructure, Inc. (NYSE:SOI).

How have hedgies been trading Solaris Oilfield Infrastructure, Inc. (NYSE:SOI)?

At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in SOI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with SOI Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital has the largest position in Solaris Oilfield Infrastructure, Inc. (NYSE:SOI), worth close to $25.9 million, amounting to 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds a $23.6 million position; 0.1% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish include Todd J. Kantor’s Encompass Capital Advisors, Anand Parekh’s Alyeska Investment Group and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Consequently, key hedge funds have jumped into Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most valuable position in Solaris Oilfield Infrastructure, Inc. (NYSE:SOI). Arrowstreet Capital had $7.1 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $0.7 million position during the quarter. The only other fund with a brand new SOI position is David Harding’s Winton Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) but similarly valued. We will take a look at Cellectis SA (NASDAQ:CLLS), OneSpan Inc. (NASDAQ:OSPN), Intellia Therapeutics, Inc. (NASDAQ:NTLA), and Federal Agricultural Mortgage Corp. (NYSE:AGM). All of these stocks’ market caps resemble SOI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CLLS 8 32826 0
OSPN 13 71319 1
NTLA 10 16843 0
AGM 9 26105 0
Average 10 36773 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $102 million in SOI’s case. OneSpan Inc. (NASDAQ:OSPN) is the most popular stock in this table. On the other hand Cellectis SA (NASDAQ:CLLS) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately SOI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SOI were disappointed as the stock returned -5.8% during the same period 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 13 of these stocks already outperformed the market in Q2.

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

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