Hedge Funds Are Dumping Noble Corporation plc (NE)

Is Noble Corporation plc (NYSE:NE) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Noble Corporation plc (NYSE:NE) investors should pay attention to a decrease in activity from the world’s largest hedge funds of late. Our calculations also showed that NE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jonathan Barrett Luminus Management

Jonathan Barrett of Luminus Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the fresh hedge fund action encompassing Noble Corporation plc (NYSE:NE).

How have hedgies been trading Noble Corporation plc (NYSE:NE)?

At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from one quarter earlier. By comparison, 21 hedge funds held shares or bullish call options in NE a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Firefly Value Partners, managed by Ryan Heslop and Ariel Warszawski, holds the number one position in Noble Corporation plc (NYSE:NE). Firefly Value Partners has a $27.6 million position in the stock, comprising 4.2% of its 13F portfolio. On Firefly Value Partners’s heels is Douglas Dethy of DC Capital Partners, with a $5.1 million position; 4.5% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish contain Himanshu H. Shah’s Shah Capital Management, Jonathan Barrett and Paul Segal’s Luminus Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position DC Capital Partners allocated the biggest weight to Noble Corporation plc (NYSE:NE), around 4.46% of its 13F portfolio. Firefly Value Partners is also relatively very bullish on the stock, earmarking 4.23 percent of its 13F equity portfolio to NE.

Because Noble Corporation plc (NYSE:NE) has experienced falling interest from hedge fund managers, logic holds that there were a few funds that decided to sell off their positions entirely in the third quarter. Interestingly, Noam Gottesman’s GLG Partners cut the largest investment of all the hedgies tracked by Insider Monkey, valued at an estimated $2.1 million in stock. Mike Vranos’s fund, Ellington, also dropped its stock, about $0.6 million worth. These moves are interesting, as total hedge fund interest was cut by 3 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Noble Corporation plc (NYSE:NE). We will take a look at Protagonist Therapeutics, Inc. (NASDAQ:PTGX), BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX), Corbus Pharmaceuticals Holdings Inc (NASDAQ:CRBP), and North American Construction Group Ltd. (NYSE:NOA). This group of stocks’ market values resemble NE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PTGX 15 105807 1
BCRX 16 102956 2
CRBP 7 30293 -1
NOA 10 47482 1
Average 12 71635 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $48 million in NE’s case. BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) is the most popular stock in this table. On the other hand Corbus Pharmaceuticals Holdings Inc (NASDAQ:CRBP) is the least popular one with only 7 bullish hedge fund positions. Noble Corporation plc (NYSE:NE) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately NE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NE were disappointed as the stock returned -16.5% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

Disclosure: None. This article was originally published at Insider Monkey.