Were Hedge Funds Illusioned With Schlumberger Limited. (SLB)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Schlumberger Limited. (NYSE:SLB) and determine whether hedge funds skillfully traded this stock.

Is Schlumberger Limited. (NYSE:SLB) the right investment to pursue these days? Prominent investors were getting less optimistic. The number of bullish hedge fund positions went down by 2 recently. Schlumberger Limited. (NYSE:SLB) was in 39 hedge funds’ portfolios at the end of September. The all time high for this statistic is 61. Our calculations also showed that SLB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 41 hedge funds in our database with SLB positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s analyze the fresh hedge fund action surrounding Schlumberger Limited. (NYSE:SLB).

William Gray Orbis Investment Management

William Gray of Orbis Investment Management

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

Heading into the fourth quarter of 2021, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the second quarter of 2021. On the other hand, there were a total of 53 hedge funds with a bullish position in SLB a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

The largest stake in Schlumberger Limited. (NYSE:SLB) was held by Fisher Asset Management, which reported holding $478.1 million worth of stock at the end of September. It was followed by D E Shaw with a $146.5 million position. Other investors bullish on the company included Holocene Advisors, Citadel Investment Group, and Orbis Investment Management. In terms of the portfolio weights assigned to each position Lodge Hill Capital allocated the biggest weight to Schlumberger Limited. (NYSE:SLB), around 3.83% of its 13F portfolio. Hourglass Capital is also relatively very bullish on the stock, setting aside 2.95 percent of its 13F equity portfolio to SLB.

Seeing as Schlumberger Limited. (NYSE:SLB) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of hedge funds that decided to sell off their positions entirely in the third quarter. At the top of the heap, Ryan Caldwell’s Chiron Investment Management dumped the largest stake of the “upper crust” of funds watched by Insider Monkey, worth an estimated $32.7 million in stock, and Todd J. Kantor’s Encompass Capital Advisors was right behind this move, as the fund cut about $24.7 million worth. These transactions are important to note, as total hedge fund interest dropped by 2 funds in the third quarter.

Let’s now review hedge fund activity in other stocks similar to Schlumberger Limited. (NYSE:SLB). We will take a look at Lucid Group Inc. (NASDAQ:LCID), Trane Technologies plc (NYSE:TT), Digital Realty Trust, Inc. (NYSE:DLR), Walgreens Boots Alliance Inc (NASDAQ:WBA), Pioneer Natural Resources Company (NYSE:PXD), American Electric Power Company, Inc. (NASDAQ:AEP), and Prudential Financial Inc (NYSE:PRU). This group of stocks’ market caps are closest to SLB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LCID 18 432623 18
TT 39 1147583 2
DLR 28 253530 -2
WBA 37 850173 -4
PXD 48 958649 3
AEP 36 751595 7
PRU 33 460021 5
Average 34.1 693453 4.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.1 hedge funds with bullish positions and the average amount invested in these stocks was $693 million. That figure was $1063 million in SLB’s case. Pioneer Natural Resources Company (NYSE:PXD) is the most popular stock in this table. On the other hand Lucid Group Inc. (NASDAQ:LCID) is the least popular one with only 18 bullish hedge fund positions. Schlumberger Limited. (NYSE:SLB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SLB is 57.2. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on SLB as the stock returned 32.4% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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