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George Soros Giving Up On This Struggling Company, While Adage Capital Moves In On This Offshore Driller

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Most hedge funds and other investors will be waiting for the third quarter earnings reports to pour in prior to rebalancing their portfolios, but some may have decided to do that before seeing where the market is heading. Adage Capital Partners L.P., founded by Phillip Gross and Robert Atchinson, reported owning 8.51 million shares or 5.29% of Ocean Rig UDW Inc. (NASDAQ:ORIG) via a recently-submitted 13G filing. This denotes a lift of 1.36 million shares to the position disclosed in its 13F filing for the June quarter. In a separate freshly-amended 13G filing, George SorosSoros Fund Management disclosed trimming its stake in Quantum Corp (NYSE:QTM) to 3.27 million shares, which account for 1.25% of the company’s outstanding common stock. George Soros’ family office revealed a 5.37 million-share stake in the big data and data protection specialist in its latest 13F filing with the SEC.

George Soros

At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning 118% and beating the market by more than 60 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.

For those of you who do not know too much about Phill Gross and Robert Atchinson’s firm, Adage Capital Partners L.P. is a hedge fund launched with a $3.8 billion commitment from Harvard Management Company in 2001. The Boston-based investment firm primarily employs a long/short equity strategy across different industries. Adage Capital also utilizes fundamental intra-industry approaches when analyzing investment opportunities, which have turned out to be quite successful over the years. The overall value of the investment firm’s public equity portfolio at the end of the second quarter added up to $40.10 billion.

Phill Gross And Robert Atchinson
Phill Gross And Robert Atchinson
Adage Capital Management

Offshore drilling contractor Ocean Rig UDW Inc. (NASDAQ:ORIG) has had a rough year in terms of both stock performance and actual performance. The market Ocean Rig operates in has been challenging thus far and continues to be so, as numerous oil companies have been forced to implement colossal spending cuts. Therefore, the company has refocused its main goals on preserving its cash and maintaining liquidity. The shares of Ocean Rig UDW have lost more than 71% since the beginning of the year, so Adage Capital Partners may be betting on a turnaround for the struggling energy industry. If the offshore drilling contractor can survive this environment, the future holds a lot of bright spots considering that the oil industry is set to rebound sooner or later. In the meantime, 16 hedge funds tracked by Insider Monkey had positions in the stock at the end of the second quarter, compared with 13 registered in the prior one. Similarly, the value of these positions increased to $207.88 million from $189.5 million quarter-over-quarter. Let’s not forget to mention that these hedge funds collectively own 25.20% of the company’s outstanding stock as of June 30, which clearly points to the fact that the smart money has faith in the future prospects of Ocean Rig UDW. James Dondero’s Highland Capital Management is the largest shareholder of Ocean Rig in our database, with 15.0 million shares.

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