Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Atwood Oceanics, Inc. (NYSE:ATW) was in 22 hedge funds’ portfolios at the end of September. ATW investors should be aware of a decrease in activity from the world’s largest hedge funds recently. There were 25 hedge funds in our database with ATW holdings at the end of the previous quarter. At the end of this article we will also compare ATW to other stocks, including Ferro Corporation (NYSE:FOE), Linn Energy LLC (NASDAQ:LINE), and Cato Corp (NYSE:CATO) to get a better sense of its popularity.
Today there are dozens of indicators stock market investors put to use to grade stocks. Two of the most underrated indicators are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the top hedge fund managers can trounce their index-focused peers by a healthy amount (see the details here).
Keeping this in mind, let’s take a peek at the new action surrounding Atwood Oceanics, Inc. (NYSE:ATW).
Hedge fund activity in Atwood Oceanics, Inc. (NYSE:ATW)
At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 12% from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Millennium Management, run by Israel Englander, holds the most valuable position in Atwood Oceanics, Inc. (NYSE:ATW). The fund reportedly holds a $39 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Point72 Asset Management, led by Steve Cohen, which holds a $22.1 million position; 0.2% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism contain Jim Simons’s Renaissance Technologies, Chuck Royce’s Royce & Associates and Cliff Asness’s AQR Capital Management.
Since Atwood Oceanics, Inc. (NYSE:ATW) has faced declining sentiment from the smart money, it’s easy to see that there were a few hedge funds that slashed their full holdings by the end of the third quarter. Interestingly, Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC dumped the largest position of the “upper crust” of funds tracked by Insider Monkey, comprising close to $69 million in stock. Neil Chriss’s fund, Hutchin Hill Capital, also dumped its stock, about $3.9 million worth of ATW shares. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 3 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Atwood Oceanics, Inc. (NYSE:ATW) but similarly valued. We will take a look at Ferro Corporation (NYSE:FOE), Linn Energy LLC (NASDAQ:LINE), Cato Corp (NYSE:CATO), and The Andersons, Inc. (NASDAQ:ANDE). This group of stocks’ market caps resemble ATW’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. That figure was $140 million in ATW’s case. Ferro Corporation (NYSE:FOE) is the most popular stock in this table. On the other hand Linn Energy LLC (NASDAQ:LINE) is the least popular one with only 5 bullish hedge fund positions. Atwood Oceanics, Inc. (NYSE:ATW) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard FOE might be a better candidate to consider a long position.