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Newpark Resources Inc (NR): Hedge Funds Are Getting Bullish

In this article we will check out the progression of hedge fund sentiment towards Newpark Resources Inc (NYSE:NR) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Newpark Resources Inc (NYSE:NR) investors should be aware of an increase in hedge fund sentiment in recent months. NR was in 15 hedge funds’ portfolios at the end of the first quarter of 2020. There were 14 hedge funds in our database with NR holdings at the end of the previous quarter. Our calculations also showed that NR isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 best imported beer in 2020 to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a gander at the recent hedge fund action encompassing Newpark Resources Inc (NYSE:NR).

What does smart money think about Newpark Resources Inc (NYSE:NR)?

At Q1’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the fourth quarter of 2019. On the other hand, there were a total of 15 hedge funds with a bullish position in NR a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Royce & Associates held the most valuable stake in Newpark Resources Inc (NYSE:NR), which was worth $1.5 million at the end of the third quarter. On the second spot was D E Shaw which amassed $1 million worth of shares. Marshall Wace LLP, Prescott Group Capital Management, and Renaissance Technologies 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 Prescott Group Capital Management allocated the biggest weight to Newpark Resources Inc (NYSE:NR), around 0.36% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to NR.

As aggregate interest increased, key hedge funds were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most valuable position in Newpark Resources Inc (NYSE:NR). Marshall Wace LLP had $0.8 million invested in the company at the end of the quarter. Phil Frohlich’s Prescott Group Capital Management also made a $0.7 million investment in the stock during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors and Cliff Asness’s AQR Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to Newpark Resources Inc (NYSE:NR). These stocks are Arlington Asset Investment Corp (NYSE:AI), Montage Resources Corp (NYSE:MR), Sorl Auto Parts, Inc. (NASDAQ:SORL), and Bank7 Corp. (NASDAQ:BSVN). This group of stocks’ market caps are similar to NR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AI 5 3061 -8
MR 11 8252 -8
SORL 2 584 -2
BSVN 2 2821 -2
Average 5 3680 -5

View table here if you experience formatting issues.

As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $6 million in NR’s case. Montage Resources Corp (NYSE:MR) is the most popular stock in this table. On the other hand Sorl Auto Parts, Inc. (NASDAQ:SORL) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Newpark Resources Inc (NYSE:NR) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on NR as the stock returned 108.9% so far in Q2 (through June 25th) 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.

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