Is DryShips Inc. (DRYS) Going To Sink These Hedge Funds?

Is DryShips Inc. (NASDAQ:DRYS) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to find the latest market-moving information.

Cheniere LNG Tanker Shipping Ship Liquid Natural Gas Vessel Fuel Carrier

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Is DryShips Inc. the right pick for your portfolio? Prominent investors are turning bullish. The number of long hedge fund bets inched up by one lately, though they were still collectively underweight the stock. At the end of this article we will also compare DRYS to other stocks including Marinus Pharmaceuticals Inc (NASDAQ:MRNS), Pure Cycle Corporation (NASDAQ:PCYO), and Energy Focus Inc (PINK:EFOI) to get a better sense of its popularity.

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In the eyes of most traders, hedge funds are assumed to be unimportant, outdated investment vehicles of years past. While there are over 8,000 funds in operation today, experts at hedge fund tracking site Insider Monkey choose to focus on the bigwigs of this group, approximately 700 funds. These investment experts oversee the bulk of the hedge fund industry’s total capital, and by shadowing their matchless picks, Insider Monkey has determined various investment strategies that have historically exceeded Mr. Market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points a year for a decade in its back tests.

Keeping this in mind, we’re going to take a look at the latest action surrounding DryShips Inc. (NASDAQ:DRYS).

How are hedge funds trading DryShips Inc. (NASDAQ:DRYS)?

At Q3’s end, a total of nine of the hedge funds tracked by Insider Monkey were bullish in this stock, 13% higher than one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully.

According to hedge fund experts at Insider Monkey, James Dondero’s Highland Capital Management has the largest position in DryShips Inc. (NASDAQ:DRYS), worth close to $1.6 million, accounting for less than 0.1% of its total 13F portfolio. The second-most bullish hedge fund manager is Andrew Feldstein and Stephen Siderow of Blue Mountain Capital, with a $0.9 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining hedgies with similar optimism contain Jim Simons’ Renaissance Technologies, Noam Gottesman’s GLG Partners, and Ken Griffin’s Citadel Investment Group.

Let’s also take a look at hedge fund activity in other stocks similar to DryShips Inc. (NASDAQ:DRYS). We will take a look at Marinus Pharmaceuticals Inc (NASDAQ:MRNS), Pure Cycle Corporation (NASDAQ:PCYO), Energy Focus Inc (PINK:EFOI), and TRACON Pharmaceuticals Inc (NASDAQ:TCON). This group of stocks’ market values are similar to DRYS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MRNS 7 5007 4
PCYO 8 51382 1
EFOI 6 2216 5
TCON 5 12671 0

As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $18 million, far greater than the $3.6 million in DryShips shares held by the same investors. Pure Cycle Corporation (NASDAQ:PCYO) is the most popular stock in this table. On the other hand TRACON Pharmaceuticals Inc (NASDAQ:TCON) is the least popular one with only five bullish hedge fund positions. Compared to these stocks DryShips Inc. (NASDAQ:DRYS) is more popular among hedge funds. However, given that smart money is underweight the stock, owning just 3.00% of its shares, it may be a good idea to look elsewhere for a possible addition to your portfolio.