At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Schlumberger Limited. (NYSE:SLB) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Is Schlumberger Limited. (NYSE:SLB) a buy right now? The best stock pickers were betting on the stock. The number of bullish hedge fund bets advanced by 4 in recent months. Schlumberger Limited. (NYSE:SLB) was in 53 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 61. Our calculations also showed that SLB isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 49 hedge funds in our database with SLB positions at the end of the first quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are numerous signals shareholders have at their disposal to appraise their stock investments. Some of the best signals are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the elite hedge fund managers can outpace the S&P 500 by a solid margin (see the details here).
Clint Carlson of Carlson Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let's take a look at the key hedge fund action regarding Schlumberger Limited. (NYSE:SLB).
How have hedgies been trading Schlumberger Limited. (NYSE:SLB)?
At Q2's end, a total of 53 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SLB over the last 20 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in Schlumberger Limited. (NYSE:SLB) was held by Fisher Asset Management, which reported holding $244.6 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $84.6 million position. Other investors bullish on the company included Point72 Asset Management, Millennium Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position RIT Capital Partners allocated the biggest weight to Schlumberger Limited. (NYSE:SLB), around 3.56% of its 13F portfolio. Deep Basin Capital is also relatively very bullish on the stock, setting aside 2.51 percent of its 13F equity portfolio to SLB.
Consequently, some big names have been driving this bullishness. Holocene Advisors, managed by Brandon Haley, initiated the most outsized position in Schlumberger Limited. (NYSE:SLB). Holocene Advisors had $42.3 million invested in the company at the end of the quarter. Clint Carlson's Carlson Capital also made a $18 million investment in the stock during the quarter. The following funds were also among the new SLB investors: Matt Smith's Deep Basin Capital, Anand Parekh's Alyeska Investment Group, and Jacob Rothschild's RIT Capital Partners.
Let's now review hedge fund activity in other stocks similar to Schlumberger Limited. (NYSE:SLB). These stocks are Johnson Controls International plc (NYSE:JCI), Fresenius Medical Care AG & Co. KGaA (NYSE:FMS), Willis Towers Watson Public Limited Company (NASDAQ:WLTW), RingCentral Inc (NYSE:RNG), PPG Industries, Inc. (NYSE:PPG), ANSYS, Inc. (NASDAQ:ANSS), and Okta, Inc. (NASDAQ:OKTA). This group of stocks' market caps resemble SLB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JCI,28,1099174,-9 FMS,6,11727,-4 WLTW,49,2288145,6 RNG,62,3647093,-5 PPG,36,261423,1 ANSS,40,1322878,9 OKTA,60,1990664,12 Average,40.1,1517301,1.4 [/table]
As you can see these stocks had an average of 40.1 hedge funds with bullish positions and the average amount invested in these stocks was $1517 million. That figure was $932 million in SLB's case. RingCentral Inc (NYSE:RNG) is the most popular stock in this table. On the other hand Fresenius Medical Care AG & Co. KGaA (NYSE:FMS) is the least popular one with only 6 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 77. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately SLB wasn't nearly as popular as these 10 stocks and hedge funds that were betting on SLB were disappointed as the stock returned 3.4% during the same time period 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 many of these stocks already outperformed the market so far this year.
