Is U.S. Well Services (USWS) A Good Stock To Buy Now?

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 U.S. Well Services, Inc. (NASDAQ:USWS) to find out whether there were any major changes in hedge funds’ views.

Is U.S. Well Services (USWS) a good stock to buy now? USWS shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that USWS 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). At the end of this article we will also compare USWS to other stocks including CounterPath Corporation (NASDAQ:CPAH), Taoping Inc. (NASDAQ:TAOP), and Acasti Pharma Inc. (NASDAQ:ACST) to get a better sense of its popularity.

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

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.

Curtis Schenker of Scoggin

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 let’s take a peek at the recent hedge fund action surrounding U.S. Well Services, Inc. (NASDAQ:USWS).

What have hedge funds been doing with U.S. Well Services, Inc. (NASDAQ:USWS)?

Heading into the fourth quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards USWS over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Angelo Gordon & Co held the most valuable stake in U.S. Well Services, Inc. (NASDAQ:USWS), which was worth $0.2 million at the end of the third quarter. On the second spot was Paloma Partners which amassed $0.1 million worth of shares. Scoggin, Millennium Management, and Hudson Bay Capital Management 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 Angelo Gordon & Co allocated the biggest weight to U.S. Well Services, Inc. (NASDAQ:USWS), around 0.02% of its 13F portfolio. Scoggin is also relatively very bullish on the stock, setting aside 0.004 percent of its 13F equity portfolio to USWS.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Renaissance Technologies. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Millennium Management).

Let’s go over hedge fund activity in other stocks similar to U.S. Well Services, Inc. (NASDAQ:USWS). We will take a look at CounterPath Corporation (NASDAQ:CPAH), Taoping Inc. (NASDAQ:TAOP), Acasti Pharma Inc. (NASDAQ:ACST), Image Sensing Systems, Inc. (NASDAQ:ISNS), Coffee Holding Co., Inc. (NASDAQ:JVA), Tenax Therapeutics Inc (NASDAQ:TENX), and Titan Pharmaceuticals, Inc. (NASDAQ:TTNP). This group of stocks’ market valuations resemble USWS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CPAH 2 802 1
TAOP 1 325 -1
ACST 1 57 -2
ISNS 1 798 0
JVA 2 2521 0
TENX 4 4787 0
TTNP 2 831 1
Average 1.9 1446 -0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 1.9 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $0 million in USWS’s case. Tenax Therapeutics Inc (NASDAQ:TENX) is the most popular stock in this table. On the other hand Taoping Inc. (NASDAQ:TAOP) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks U.S. Well Services, Inc. (NASDAQ:USWS) is more popular among hedge funds. Our overall hedge fund sentiment score for USWS is 67. 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 November 27th but still managed to beat the market by 16.1 percentage points. Hedge funds were also right about betting on USWS as the stock returned 51.9% since the end of September (through 11/27) 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.

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