A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Ocean Rig UDW Inc (NASDAQ:ORIG).
Ocean Rig UDW Inc (NASDAQ:ORIG) shareholders have witnessed an increase in support from the world’s most elite money managers of late. There were 28 hedge funds long the stock at the end of the third quarter, up by one from the previous quarter. The number of shareholders the company had in the third quarter was not even close for the company to be included in the list of 30 most popular stocks among hedge funds in Q3 of 2018. So, what does that mean exactly? That you shouldn’t include it in your portfolio because it wasn’t one of the stock hedge funds were piling on in the third quarter? Absolutely not. It is necessary to conduct more research about the company, and also to check how popular the company was when compared to similarly valued companies. Hence, we continue our analysis.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 17.4% year to date and outperformed the market by more than 14 percentage points this year. This strategy also outperformed the market by 3 percentage points in the fourth quarter despite the market volatility (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
While collecting more data about the company, we found Third Avenue Value Fund’s Portfolio Manager Commentary, in which this open-ended equity mutual fund shares its views on the stock. Here is that part of report:
“Ocean Rig UDW – In September Ocean Rig UDW, one of our two offshore drilling rig company investments, agreed to be acquired by larger industry peer Transocean Ltd at an approximate 30% premium to Ocean Rig’s pre-announcement trading price. Although we believe the price paid was ultimately on the cheaper side, much of the price paid is in the form of Transocean common stock, which could provide additional upside should one want to continue to hold shares of Transocean. This development led to Ocean Rig being the Fund’s second largest positive contributor to performance during the quarter. Ocean Rig is one of two oil service companies we purchased following their reemergence as publicly traded equities following their perspective bankruptcy processes. The other such investment is Tidewater. The bankruptcy process allowed both companies to reorganize with pristine balance sheets, essentially all of their debt having been converted into equity. They also initially traded with very compelling valuations and sported high quality underlying assets. As the offshore oil services industry consolidation aspect of our investment thesis has certainly picked up steam. “
Now, we’re going to take a gander at the key hedge fund action encompassing Ocean Rig UDW Inc (NASDAQ:ORIG).
How are hedge funds trading Ocean Rig UDW Inc (NASDAQ:ORIG)?
At Q3’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in ORIG heading into this year. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
The largest stake in Ocean Rig UDW Inc (NASDAQ:ORIG) was held by Elliott Management, which reported holding $640.3 million worth of stock at the end of September. It was followed by Blue Mountain Capital with a $340.9 million position. Other investors bullish on the company included Avenue Capital, Carlson Capital, and Alpine Associates.
Now, key money managers have been driving this bullishness. Carlson Capital, managed by Clint Carlson, initiated the most outsized position in Ocean Rig UDW Inc (NASDAQ:ORIG). Carlson Capital had $104.9 million invested in the company at the end of the quarter. Robert Emil Zoellner’s Alpine Associates also initiated a $89.3 million position during the quarter. The following funds were also among the new ORIG investors: Matthew Halbower’s Pentwater Capital Management, John Bader’s Halcyon Asset Management, and Daniel Arbess’s Perella Weinberg Partners.
Let’s also examine hedge fund activity in other stocks similar to Ocean Rig UDW Inc (NASDAQ:ORIG). We will take a look at Greif, Inc. (NYSE:GEF), Antero Midstream GP LP (NYSE:AMGP), Companhia Siderurgica Nacional (NYSE:SID), and Canada Goose Holdings Inc. (NYSE:GOOS). This group of stocks’ market valuations are similar to 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 15 hedge funds with bullish positions and the average amount invested in these stocks was $115 million. That figure was $1.81 billion in ORIG’s case. Greif, Inc. (NYSE:GEF) is the most popular stock in this table. On the other hand Companhia Siderurgica Nacional (NYSE:SID) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Ocean Rig UDW Inc (NASDAQ:ORIG) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.