DryShips Inc. (NASDAQ:DRYS) was in 7 hedge funds' portfolio at the end of December. DRYS has seen a decrease in support from the world's most elite money managers lately. There were 10 hedge funds in our database with DRYS positions at the end of the previous quarter.
To most market participants, hedge funds are seen as unimportant, old financial vehicles of the past. While there are greater than 8000 funds with their doors open at present, we hone in on the aristocrats of this group, about 450 funds. Most estimates calculate that this group oversees most of the smart money's total capital, and by tracking their best equity investments, we have uncovered a number of investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we've started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).
Just as important, optimistic insider trading activity is another way to parse down the financial markets. As the old adage goes: there are a number of reasons for a bullish insider to cut shares of his or her company, but only one, very clear reason why they would behave bullishly. Several academic studies have demonstrated the impressive potential of this method if investors understand where to look (learn more here).
Consequently, it's important to take a glance at the key action surrounding DryShips Inc. (NASDAQ:DRYS).
At year's end, a total of 7 of the hedge funds we track were bullish in this stock, a change of -30% from the third quarter. With hedge funds' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings meaningfully.
When looking at the hedgies we track, ZWEIG DIMENNA PARTNERS, managed by Joe DiMenna, holds the largest position in DryShips Inc. (NASDAQ:DRYS). ZWEIG DIMENNA PARTNERS has a $7.8 million position in the stock, comprising 0.4% of its 13F portfolio. Coming in second is Richard Chilton of Chilton Investment Company, with a $4 million position; 0.1% of its 13F portfolio is allocated to the company. Some other hedgies that hold long positions include Jim Simons's Renaissance Technologies, David Costen Haley's HBK Investments and Ken Griffin's Citadel Investment Group.
Seeing as DryShips Inc. (NASDAQ:DRYS) has faced falling interest from the aggregate hedge fund industry, it's safe to say that there lies a certain "tier" of funds who were dropping their positions entirely heading into 2013. At the top of the heap, Malcolm Fairbairn's Ascend Capital dropped the largest investment of the "upper crust" of funds we watch, valued at an estimated $11.6 million in stock., and Cliff Asness of AQR Capital Management was right behind this move, as the fund dumped about $1.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 3 funds heading into 2013.
Bullish insider trading is particularly usable when the company in question has seen transactions within the past 180 days. Over the last half-year time frame, DryShips Inc. (NASDAQ:DRYS) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).
Let's also examine hedge fund and insider activity in other stocks similar to DryShips Inc. (NASDAQ:DRYS). These stocks are Capital Product Partners L.P. (NASDAQ:CPLP), Alexander & Baldwin Holdings Inc (NYSE:MATX), GasLog Ltd (NYSE:GLOG), Diana Shipping Inc. (NYSE:DSX), and Navios Maritime Partners L.P. (NYSE:NMM). This group of stocks are the members of the shipping industry and their market caps resemble DRYS's market cap.