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Were Hedge Funds Right About Flocking Into Patterson-UTI Energy, Inc. (PTEN) ?

Is Patterson-UTI Energy, Inc. (NASDAQ:PTEN) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably but historically their consensus stock picks outperformed the market after adjusting for known risk factors.

Is Patterson-UTI Energy, Inc. (NASDAQ:PTEN) worth your attention right now? The smart money is buying. The number of long hedge fund bets inched up by 8 in recent months. Our calculations also showed that PTEN isn’t among the 30 most popular stocks among hedge funds.

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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Irving Kahn

We’re going to take a peek at the latest hedge fund action regarding Patterson-UTI Energy, Inc. (NASDAQ:PTEN).

How have hedgies been trading Patterson-UTI Energy, Inc. (NASDAQ:PTEN)?

At Q4’s end, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 26% from the second quarter of 2018. On the other hand, there were a total of 37 hedge funds with a bullish position in PTEN a year ago. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

PTEN_apr2019

Among these funds, Millennium Management held the most valuable stake in Patterson-UTI Energy, Inc. (NASDAQ:PTEN), which was worth $35.4 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $31.7 million worth of shares. Moreover, Point72 Asset Management, Citadel Investment Group, and Kahn Brothers were also bullish on Patterson-UTI Energy, Inc. (NASDAQ:PTEN), allocating a large percentage of their portfolios to this stock.

Consequently, key hedge funds have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, created the most outsized call position in Patterson-UTI Energy, Inc. (NASDAQ:PTEN). Point72 Asset Management had $5.2 million invested in the company at the end of the quarter. Joe Milano’s Greenhouse Funds also made a $4.2 million investment in the stock during the quarter. The other funds with brand new PTEN positions are Jim Simons’s Renaissance Technologies, Brandon Haley’s Holocene Advisors, and John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Patterson-UTI Energy, Inc. (NASDAQ:PTEN) but similarly valued. We will take a look at frontdoor, inc. (NASDAQ:FTDR), InterDigital, Inc. (NASDAQ:IDCC), Conduent Incorporated (NYSE:CNDT), and Sunoco LP (NYSE:SUN). This group of stocks’ market valuations are similar to PTEN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FTDR 24 189778 22
IDCC 21 138794 3
CNDT 35 487994 1
SUN 7 11185 0
Average 21.75 206938 6.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $207 million. That figure was $236 million in PTEN’s case. Conduent Incorporated (NYSE:CNDT) is the most popular stock in this table. On the other hand Sunoco LP (NYSE:SUN) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Patterson-UTI Energy, Inc. (NASDAQ:PTEN) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on PTEN as the stock returned 56.6% 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.

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

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