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Were Hedge Funds Right About Core Laboratories N.V. (CLB)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Core Laboratories N.V. (NYSE:CLB)? The smart money sentiment can provide an answer to this question.

Core Laboratories N.V. (NYSE:CLB) investors should be aware of an increase in enthusiasm from smart money lately. CLB was in 25 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 16 hedge funds in our database with CLB holdings at the end of the previous quarter. Our calculations also showed that CLB 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).

According to most traders, hedge funds are assumed to be unimportant, outdated financial vehicles of years past. While there are over 8000 funds trading today, Our researchers hone in on the leaders of this club, around 850 funds. These investment experts handle the lion’s share of the hedge fund industry’s total asset base, and by tailing their matchless equity investments, Insider Monkey has determined a number of investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Ken Fisher FISHER ASSET MANAGEMENT

Ken Fisher of Fisher Asset Management

We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). 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 we’re going to view the new hedge fund action surrounding Core Laboratories N.V. (NYSE:CLB).

How have hedgies been trading Core Laboratories N.V. (NYSE:CLB)?

Heading into the first quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 56% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CLB over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Core Laboratories N.V. (NYSE:CLB) was held by Select Equity Group, which reported holding $54.7 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $38 million position. Other investors bullish on the company included Citadel Investment Group, Winton Capital Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Select Equity Group allocated the biggest weight to Core Laboratories N.V. (NYSE:CLB), around 0.35% of its 13F portfolio. Prescott Group Capital Management is also relatively very bullish on the stock, earmarking 0.31 percent of its 13F equity portfolio to CLB.

With a general bullishness amongst the heavyweights, specific money managers have jumped into Core Laboratories N.V. (NYSE:CLB) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the biggest position in Core Laboratories N.V. (NYSE:CLB). Arrowstreet Capital had $3.6 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $1.4 million position during the quarter. The following funds were also among the new CLB investors: Minhua Zhang’s Weld Capital Management, Phil Frohlich’s Prescott Group Capital Management, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Core Laboratories N.V. (NYSE:CLB) but similarly valued. We will take a look at Mobile Mini Inc (NASDAQ:MINI), Denali Therapeutics Inc. (NASDAQ:DNLI), SpringWorks Therapeutics, Inc. (NASDAQ:SWTX), and Forty Seven, Inc. (NASDAQ:FTSV). This group of stocks’ market caps are closest to CLB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MINI 24 193790 2
DNLI 9 28103 1
SWTX 11 658924 0
FTSV 18 351335 9
Average 15.5 308038 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $308 million. That figure was $119 million in CLB’s case. Mobile Mini Inc (NASDAQ:MINI) is the most popular stock in this table. On the other hand Denali Therapeutics Inc. (NASDAQ:DNLI) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Core Laboratories N.V. (NYSE:CLB) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th and still beat the market by 4.2 percentage points. Unfortunately CLB wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CLB were disappointed as the stock returned -72.5% during the three months of 2020 (through April 6th) 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 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.

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