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Were Hedge Funds Right About Souring On Forum Energy Technologies Inc (FET)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Forum Energy Technologies Inc (NYSE:FET).

Forum Energy Technologies Inc (NYSE:FET) investors should be aware of a decrease in enthusiasm from smart money lately. Our calculations also showed that FET isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Michael Platt Bluecrest Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the key hedge fund action regarding Forum Energy Technologies Inc (NYSE:FET).

Hedge fund activity in Forum Energy Technologies Inc (NYSE:FET)

At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FET over the last 17 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Millennium Management, managed by Israel Englander, holds the largest position in Forum Energy Technologies Inc (NYSE:FET). Millennium Management has a $9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which holds a $2.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions consist of Dmitry Balyasny’s Balyasny Asset Management, David E. Shaw’s D E Shaw and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Algert Coldiron Investors allocated the biggest weight to Forum Energy Technologies Inc (NYSE:FET), around 0.08% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to FET.

Due to the fact that Forum Energy Technologies Inc (NYSE:FET) has witnessed a decline in interest from hedge fund managers, we can see that there lies a certain “tier” of hedgies that elected to cut their entire stakes by the end of the third quarter. Interestingly, Perella Weinberg Partners said goodbye to the biggest investment of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $17.1 million in stock, and Ben Gambill’s Tiger Eye Capital was right behind this move, as the fund said goodbye to about $0.4 million worth. These moves are interesting, as aggregate hedge fund interest fell by 3 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Forum Energy Technologies Inc (NYSE:FET) but similarly valued. We will take a look at Bel Fuse, Inc. (NASDAQ:BELFA), Malvern Bancorp, Inc. (NASDAQ:MLVF), IntriCon Corporation (NASDAQ:IIN), and Auburn National Bancorporation, Inc. (NASDAQ:AUBN). This group of stocks’ market values are closest to FET’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BELFA 4 5629 0
MLVF 4 32062 0
IIN 9 23467 2
AUBN 2 708 -1
Average 4.75 15467 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $19 million in FET’s case. IntriCon Corporation (NASDAQ:IIN) is the most popular stock in this table. On the other hand Auburn National Bancorporation, Inc. (NASDAQ:AUBN) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Forum Energy Technologies Inc (NYSE:FET) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately FET wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FET were disappointed as the stock returned -15.5% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.

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

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