Is WTTR A Good Stock To Buy Now?

In this article we will analyze whether Select Energy Services, Inc. (NYSE:WTTR) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is WTTR a good stock to buy now? Hedge funds were becoming less confident. The number of bullish hedge fund positions dropped by 3 in recent months. Select Energy Services, Inc. (NYSE:WTTR) was in 10 hedge funds’ portfolios at the end of September. The all time high for this statistics is 16. Our calculations also showed that WTTR 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David Harding

David Harding of Winton Capital Management

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 look at the latest hedge fund action surrounding Select Energy Services, Inc. (NYSE:WTTR).

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

At the end of September, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from the second quarter of 2020. By comparison, 10 hedge funds held shares or bullish call options in WTTR a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Select Energy Services, Inc. (NYSE:WTTR) was held by Brightlight Capital, which reported holding $4.4 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $4.1 million position. Other investors bullish on the company included Encompass Capital Advisors, Arrowstreet Capital, and Winton Capital Management. In terms of the portfolio weights assigned to each position Brightlight Capital allocated the biggest weight to Select Energy Services, Inc. (NYSE:WTTR), around 2.09% of its 13F portfolio. Encompass Capital Advisors is also relatively very bullish on the stock, designating 0.34 percent of its 13F equity portfolio to WTTR.

Since Select Energy Services, Inc. (NYSE:WTTR) has faced declining sentiment from the smart money, logic holds that there exists a select few money managers who sold off their full holdings heading into Q4. At the top of the heap, Phill Gross and Robert Atchinson’s Adage Capital Management said goodbye to the biggest stake of all the hedgies monitored by Insider Monkey, totaling close to $5.1 million in stock, and Greg Eisner’s Engineers Gate Manager was right behind this move, as the fund said goodbye to about $0.1 million worth. These moves are important to note, as total hedge fund interest was cut by 3 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to Select Energy Services, Inc. (NYSE:WTTR). We will take a look at Kosmos Energy Ltd (NYSE:KOS), Tristate Capital Holdings Inc (NASDAQ:TSC), SeaSpine Holdings Corp (NASDAQ:SPNE), Haverty Furniture Companies, Inc. (NYSE:HVT), Bank of Marin Bancorp (NASDAQ:BMRC), HCI Group Inc (NYSE:HCI), and Kaleido BioSciences, Inc. (NASDAQ:KLDO). This group of stocks’ market values are closest to WTTR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KOS 11 8123 -1
TSC 17 36134 0
SPNE 16 51405 0
HVT 14 52327 3
BMRC 7 9987 -1
HCI 10 32195 -1
KLDO 2 8819 -5
Average 11 28427 -0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $15 million in WTTR’s case. Tristate Capital Holdings Inc (NASDAQ:TSC) is the most popular stock in this table. On the other hand Kaleido BioSciences, Inc. (NASDAQ:KLDO) is the least popular one with only 2 bullish hedge fund positions. Select Energy Services, Inc. (NYSE:WTTR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WTTR is 47.4. 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 gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on WTTR as the stock returned 23.2% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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