Should You Avoid NexTier Oilfield Solutions Inc. (NEX)?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded NexTier Oilfield Solutions Inc. (NYSE:NEX) based on those filings.

NexTier Oilfield Solutions Inc. (NYSE:NEX) was in 21 hedge funds’ portfolios at the end of the first quarter of 2020. NEX investors should pay attention to a decrease in hedge fund interest in recent months. There were 29 hedge funds in our database with NEX holdings at the end of the previous quarter. Our calculations also showed that NEX 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 today’s marketplace there are numerous formulas shareholders have at their disposal to evaluate stocks. Two of the most under-the-radar formulas are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the top money managers can outpace the broader indices by a superb margin (see the details here).

Stephen Feinberg Cerberus Capital

Stephen Feinberg of Cerberus Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the latest hedge fund action regarding NexTier Oilfield Solutions Inc. (NYSE:NEX).

How have hedgies been trading NexTier Oilfield Solutions Inc. (NYSE:NEX)?

At Q1’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -28% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position in NEX 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.

The largest stake in NexTier Oilfield Solutions Inc. (NYSE:NEX) was held by Cerberus Capital Management, which reported holding $45.5 million worth of stock at the end of September. It was followed by Pzena Investment Management with a $11.4 million position. Other investors bullish on the company included Renaissance Technologies, Fisher Asset Management, and Prescott Group Capital Management. In terms of the portfolio weights assigned to each position Covalent Capital Partners allocated the biggest weight to NexTier Oilfield Solutions Inc. (NYSE:NEX), around 9.04% of its 13F portfolio. Cerberus Capital Management is also relatively very bullish on the stock, earmarking 8.99 percent of its 13F equity portfolio to NEX.

Judging by the fact that NexTier Oilfield Solutions Inc. (NYSE:NEX) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there were a few hedge funds who were dropping their positions entirely last quarter. At the top of the heap, Anand Parekh’s Alyeska Investment Group dumped the largest position of the “upper crust” of funds monitored by Insider Monkey, worth about $6.9 million in stock, and Matt Smith’s Deep Basin Capital was right behind this move, as the fund sold off about $6.8 million worth. These moves are important to note, as aggregate hedge fund interest fell by 8 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to NexTier Oilfield Solutions Inc. (NYSE:NEX). These stocks are GenMark Diagnostics, Inc (NASDAQ:GNMK), Navigator Holdings Ltd (NYSE:NVGS), Silver Spike Acquisition Corp. (NASDAQ:SSPKU), and ADMA Biologics Inc (NASDAQ:ADMA). This group of stocks’ market caps resemble NEX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GNMK 14 43800 -3
NVGS 13 18880 -3
SSPKU 12 35047 2
ADMA 19 86590 7
Average 14.5 46079 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $85 million in NEX’s case. ADMA Biologics Inc (NASDAQ:ADMA) is the most popular stock in this table. On the other hand Silver Spike Acquisition Corp. (NASDAQ:SSPKU) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks NexTier Oilfield Solutions Inc. (NYSE:NEX) 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 12.2% in 2020 through June 17th but still managed to beat the market by 14.8 percentage points. Hedge funds were also right about betting on NEX as the stock returned 142.7% so far in Q2 (through June 17th) 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.