Do Hedge Funds and Insiders Love Transocean LTD (RIG)?

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Is Transocean LTD (NYSE:RIG) going to take off soon? Money managers are taking a bullish view. The number of long hedge fund bets inched up by 7 recently.

In the eyes of most traders, hedge funds are viewed as worthless, old financial vehicles of the past. While there are greater than 8000 funds trading at present, we choose to focus on the top tier of this group, close to 450 funds. Most estimates calculate that this group controls the lion’s share of the smart money’s total asset base, and by paying attention to their best stock picks, we have come up with a few investment strategies that have historically outpaced the S&P 500 index. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per annum 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 trumped the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Equally as key, bullish insider trading activity is another way to parse down the stock market universe. Just as you’d expect, there are a variety of motivations for an upper level exec to drop shares of his or her company, but just one, very obvious reason why they would buy. Several empirical studies have demonstrated the market-beating potential of this method if “monkeys” know where to look (learn more here).

Consequently, let’s take a look at the latest action encompassing Transocean LTD (NYSE:RIG).

What does the smart money think about Transocean LTD (NYSE:RIG)?

At the end of the first quarter, a total of 48 of the hedge funds we track were bullish in this stock, a change of 17% from one quarter earlier. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were upping their holdings significantly.

Transocean LTD (NYSE:RIG)When looking at the hedgies we track, Icahn Capital LP, managed by Carl Icahn, holds the most valuable position in Transocean LTD (NYSE:RIG). Icahn Capital LP has a $1.0472 billion position in the stock, comprising 6.2% of its 13F portfolio. Sitting at the No. 2 spot is Omega Advisors, managed by Leon Cooperman, which held a $164.9 million position; the fund has 2.6% of its 13F portfolio invested in the stock. Remaining hedgies with similar optimism include Glenn Russell Dubin’s Highbridge Capital Management, David Tepper’s Appaloosa Management LP and Steven Cohen’s SAC Capital Advisors.

As industrywide interest jumped, key money managers have been driving this bullishness. Jabre Capital Partners, managed by Philippe Jabre, established the most valuable call position in Transocean LTD (NYSE:RIG). Jabre Capital Partners had 52 million invested in the company at the end of the quarter. Louis Bacon’s Moore Global Investments also made a $42.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Daniel Lewis’s Orange Capital, Alec Litowitz and Ross Laser’s Magnetar Capital, and Cliff Asness’s AQR Capital Management.

How have insiders been trading Transocean LTD (NYSE:RIG)?

Insider buying is at its handiest when the company we’re looking at has experienced transactions within the past half-year. Over the last half-year time frame, Transocean LTD (NYSE:RIG) has seen zero unique insiders purchasing, and 3 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Transocean LTD (NYSE:RIG). These stocks are Diamond Offshore Drilling Inc (NYSE:DO), Concho Resources Inc. (NYSE:CXO), Cenovus Energy Inc (USA) (NYSE:CVE), ENSCO PLC (NYSE:ESV), and Seadrill Ltd (NYSE:SDRL). This group of stocks belong to the oil & gas drilling & exploration industry and their market caps are similar to RIG’s market cap.

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