Was The Smart Money Right About Nabors Industries Ltd. (NBR)?

Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In this article, we are going to look at what the smart money thinks of Nabors Industries Ltd. (NYSE:NBR) based on 4+ years of sentiment data.

Nabors Industries Ltd. (NYSE:NBR) was in 21 hedge funds’ portfolios at the end of December. NBR investors should be aware of an increase in enthusiasm from smart money in recent months. There were 20 hedge funds in our database with NBR positions at the end of the previous quarter. Our calculations also showed that NBR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

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 more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Leon Cooperman of Omega Advisors

We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s go over the key hedge fund action surrounding Nabors Industries Ltd. (NYSE:NBR).

What does smart money think about Nabors Industries Ltd. (NYSE:NBR)?

At Q4’s end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NBR over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

The largest stake in Nabors Industries Ltd. (NYSE:NBR) was held by Renaissance Technologies, which reported holding $58.4 million worth of stock at the end of September. It was followed by Omega Advisors with a $42.4 million position. Other investors bullish on the company included Gotham Asset Management, LMR Partners, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Elm Ridge Capital allocated the biggest weight to Nabors Industries Ltd. (NYSE:NBR), around 2.52% of its 13F portfolio. Omega Advisors is also relatively very bullish on the stock, setting aside 2.26 percent of its 13F equity portfolio to NBR.

As one would reasonably expect, some big names were leading the bulls’ herd. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, initiated the largest position in Nabors Industries Ltd. (NYSE:NBR). LMR Partners had $6.8 million invested in the company at the end of the quarter. Andrew Weiss’s Weiss Asset Management also made a $3.6 million investment in the stock during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, Mark Broach’s Manatuck Hill Partners, and Andy Redleaf’s Whitebox Advisors.

Let’s go over hedge fund activity in other stocks similar to Nabors Industries Ltd. (NYSE:NBR). We will take a look at Bitauto Holdings Limited (NYSE:BITA), AK Steel Holding Corporation (NYSE:AKS), John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS), and Heritage Financial Corporation (NASDAQ:HFWA). This group of stocks’ market values resemble NBR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BITA 15 127794 1
AKS 11 36663 -3
JBSS 17 66509 0
HFWA 6 22500 -4
Average 12.25 63367 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $148 million in NBR’s case. John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) is the most popular stock in this table. On the other hand Heritage Financial Corporation (NASDAQ:HFWA) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Nabors Industries Ltd. (NYSE:NBR) 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 gained 1.0% in 2020 through May 1st and still beat the market by 12.9 percentage points. Unfortunately NBR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on NBR were disappointed as the stock returned -90.2% during the four months of 2020 (through May 1st) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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