Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
The stock that we are going to discuss in this article is Atwood Oceanics, Inc. (NYSE:ATW). During the third quarter, the number of funds from our database long the stock decreased by five. At the end of this article we will also compare ATW to other stocks including Keryx Biopharmaceuticals (NASDAQ:KERX), Aceto Corporation (NASDAQ:ACET), and FTD Companies Inc (NASDAQ:FTD) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
With all of this in mind, we’re going to take a gander at the recent action surrounding Atwood Oceanics, Inc. (NYSE:ATW).
Hedge fund activity in Atwood Oceanics, Inc. (NYSE:ATW)
At the end of September, 15 investors tracked by Insider Monkey were bullish on Atwood Oceanics, versus 20 funds a quarter earlier. Below, you can check out the change in hedge fund sentiment towards ATW over the last five quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holds the largest position in Atwood Oceanics, Inc. (NYSE:ATW). Arrowstreet Capital has a $21.8 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Millennium Management, one of the 10 biggest funds in the world, with a $13.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions include Cliff Asness’ AQR Capital Management, Till Bechtolsheimer’s Arosa Capital Management, and Joel Greenblatt’s Gotham Asset Management. We should note that Arosa Capital Management is 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.
Because Atwood Oceanics, Inc. (NYSE:ATW) has sustained falling interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of fund managers that decided to sell off their entire stakes in the third quarter. Interestingly, Anand Parekh’s Alyeska Investment Group cut the largest stake of all the investors monitored by Insider Monkey, totaling about $10 million in stock. D. E. Shaw’s D E Shaw, also said goodbye to its stock, about $3.7 million worth.
Let’s now take a look at 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 Keryx Biopharmaceuticals (NASDAQ:KERX), Aceto Corporation (NASDAQ:ACET), FTD Companies Inc (NASDAQ:FTD), and Sodastream International Ltd (NASDAQ:SODA). This group of stocks’ market values are similar to ATW’s market value.
|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 $88 million, versus $70 million in ATW’s case. Sodastream International Ltd (NASDAQ:SODA) is the most popular stock in this table with 16 funds holding shares. On the other hand Keryx Biopharmaceuticals (NASDAQ:KERX) is the least popular one with only 11 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 Sodastream International Ltd (NASDAQ:SODA) might be a better candidate to consider taking a long position in.