Nine Energy Service, Inc. (NINE) Is Burning These Hedge Funds

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their June 28 holdings, data that is available nowhere else. Should you consider Nine Energy Service, Inc. (NYSE:NINE) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Nine Energy Service, Inc. (NYSE:NINE) investors should be aware of a decrease in enthusiasm from smart money in recent months. Our calculations also showed that NINE isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Phill Gross, Adage Capital Management

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a glance at the key hedge fund action surrounding Nine Energy Service, Inc. (NYSE:NINE).

What does smart money think about Nine Energy Service, Inc. (NYSE:NINE)?

At Q2’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -40% from the first quarter of 2019. By comparison, 11 hedge funds held shares or bullish call options in NINE a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with NINE Positions

Of the funds tracked by Insider Monkey, Phill Gross and Robert Atchinson’s Adage Capital Management has the number one position in Nine Energy Service, Inc. (NYSE:NINE), worth close to $17.1 million, accounting for less than 0.1%% of its total 13F portfolio. On Adage Capital Management’s heels is Encompass Capital Advisors, managed by Todd J. Kantor, which holds a $10.7 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions consist of Dmitry Balyasny’s Balyasny Asset Management, Robert Hockett’s Covalent Capital Partners and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Due to the fact that Nine Energy Service, Inc. (NYSE:NINE) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there is a sect of hedgies who sold off their entire stakes in the second quarter. It’s worth mentioning that Richard Driehaus’s Driehaus Capital cut the biggest stake of the 750 funds tracked by Insider Monkey, valued at close to $1.7 million in stock. Renaissance Technologies, also said goodbye to its stock, about $1.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 4 funds in the second quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Nine Energy Service, Inc. (NYSE:NINE) but similarly valued. We will take a look at ObsEva SA (NASDAQ:OBSV), Changyou.Com Limited (NASDAQ:CYOU), Niu Technologies (NASDAQ:NIU), and American Public Education, Inc. (NASDAQ:APEI). This group of stocks’ market caps match NINE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OBSV 8 64275 -3
CYOU 9 29815 -2
NIU 6 25149 4
APEI 13 75843 -2
Average 9 48771 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $37 million in NINE’s case. American Public Education, Inc. (NASDAQ:APEI) is the most popular stock in this table. On the other hand Niu Technologies (NASDAQ:NIU) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Nine Energy Service, Inc. (NYSE:NINE) is even less popular than NIU. Hedge funds dodged a bullet by taking a bearish stance towards NINE. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately NINE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); NINE investors were disappointed as the stock returned -64.4% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.

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