Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Is Ocean Rig UDW LLC (NASDAQ:ORIG) a first-rate investment today? The smart money is indeed getting less bullish. The number of bullish hedge fund positions that are disclosed in regulatory 13F filings slashed by 3 lately. ORIG was in 8 hedge funds’ portfolios at the end of the third quarter of 2016. There were 11 hedge funds in our database with ORIG holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Twin Disc, Incorporated (NASDAQ:TWIN), Talend SA ADR (NASDAQ:TLND), and YuMe Inc (NYSE:YUME) to gather more data points.
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
Keeping this in mind, we’re going to check out the fresh action regarding Ocean Rig UDW LLC (NASDAQ:ORIG).
What does the smart money think about Ocean Rig UDW LLC (NASDAQ:ORIG)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 27% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in ORIG heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, James Dondero’s Highland Capital Management has the largest position in Ocean Rig UDW LLC (NASDAQ:ORIG), worth close to $7.4 million, accounting for 0.2% of its total 13F portfolio. On Highland Capital Management’s heels is Renaissance Technologies, one of the largest hedge funds in the world, which holds a $1.2 million position; less than 0.1% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Phill Gross and Robert Atchinson’s Adage Capital Management and Ken Griffin’s Citadel Investment Group. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually cut their positions entirely. Interestingly, Robert B. Gillam’s McKinley Capital Management cut the biggest stake of all the investors monitored by Insider Monkey, valued at an estimated $1.8 million in stock, and Joshua Packwood and Schuster Tanger’s Radix Partners was right behind this move, as the fund dumped about $0.3 million worth of shares.
Let’s go over hedge fund activity in other stocks similar to Ocean Rig UDW LLC (NASDAQ:ORIG). We will take a look at Twin Disc, Incorporated (NASDAQ:TWIN), Talend SA ADR (NASDAQ:TLND), YuMe Inc (NYSE:YUME), and Pure Cycle Corporation (NASDAQ:PCYO). This group of stocks’ market valuations match ORIG’s market valuation.
|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 7 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $10 million in ORIG’s case. YuMe Inc (NYSE:YUME) is the most popular stock in this table. On the other hand Pure Cycle Corporation (NASDAQ:PCYO) is the least popular one with only 6 bullish hedge fund positions. Ocean Rig UDW LLC (NASDAQ:ORIG) 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 YUME might be a better candidate to consider taking a long position in.