Hedge Funds Have Never Been Less Bullish On Valaris plc (VAL)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Valaris plc (NYSE:VAL) based on that data.

Valaris plc (NYSE:VAL) shareholders have witnessed a decrease in hedge fund interest lately. VAL was in 18 hedge funds’ portfolios at the end of the third quarter of 2019. There were 28 hedge funds in our database with VAL positions at the end of the previous quarter. Our calculations also showed that VAL 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.

In the eyes of most traders, hedge funds are assumed to be slow, outdated financial vehicles of yesteryear. While there are greater than 8000 funds trading at present, Our experts choose to focus on the upper echelon of this club, approximately 750 funds. It is estimated that this group of investors preside over the lion’s share of the hedge fund industry’s total capital, and by tracking their first-class picks, Insider Monkey has uncovered many investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Crispin Odey of Odey Asset Management Group

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. Let’s view the recent hedge fund action regarding Valaris plc (NYSE:VAL).

How are hedge funds trading Valaris plc (NYSE:VAL)?

Heading into the fourth quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -36% from the second quarter of 2019. By comparison, 29 hedge funds held shares or bullish call options in VAL a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

More specifically, Odey Asset Management Group was the largest shareholder of Valaris plc (NYSE:VAL), with a stake worth $44 million reported as of the end of September. Trailing Odey Asset Management Group was Luminus Management, which amassed a stake valued at $42.8 million. Canyon Capital Advisors, Shah Capital Management, and Orbis Investment Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Shah Capital Management allocated the biggest weight to Valaris plc (NYSE:VAL), around 5.91% of its 13F portfolio. Odey Asset Management Group is also relatively very bullish on the stock, dishing out 4.92 percent of its 13F equity portfolio to VAL.

Judging by the fact that Valaris plc (NYSE:VAL) has witnessed a decline in interest from hedge fund managers, logic holds that there is a sect of hedgies who sold off their positions entirely by the end of the third quarter. Interestingly, Ken Griffin’s Citadel Investment Group cut the biggest position of the 750 funds watched by Insider Monkey, valued at an estimated $29.1 million in stock. Don Morgan’s fund, Brigade Capital, also dumped its stock, about $24 million worth. These transactions are important to note, as total hedge fund interest was cut by 10 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 Valaris plc (NYSE:VAL) but similarly valued. We will take a look at OneSpaWorld Holdings Limited (NASDAQ:OSW), Unitil Corporation (NYSE:UTL), Kelly Services, Inc. (NASDAQ:KELYA), and Continental Building Products Inc (NYSE:CBPX). This group of stocks’ market valuations are similar to VAL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OSW 8 68378 -3
UTL 12 85939 3
KELYA 13 21215 3
CBPX 17 81521 0
Average 12.5 64263 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $173 million in VAL’s case. Continental Building Products Inc (NYSE:CBPX) is the most popular stock in this table. On the other hand OneSpaWorld Holdings Limited (NASDAQ:OSW) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Valaris plc (NYSE:VAL) is more popular among hedge funds. 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 VAL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on VAL were disappointed as the stock returned -11.4% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.

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