Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Ocean Rig UDW Inc (NASDAQ:ORIG) from the perspective of those elite funds.
Ocean Rig UDW Inc (NASDAQ:ORIG) was in 15 hedge funds’ portfolios at the end of the third quarter of 2015. ORIG shareholders have witnessed a decrease in hedge fund sentiment of late. There were 16 hedge funds in our database with ORIG holdings at the end of the previous quarter. At the end of this article we will also compare ORIG to other stocks including Martha Stewart Living Omnimedia, Inc. (NYSE:MSO), Mercantile Bank Corp. (NASDAQ:MBWM), and Federated National Holding Co (NASDAQ:FNHC) to get a better sense of its popularity.
In the financial world there are many signals stock market investors have at their disposal to assess stocks. Some of the best signals are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the top money managers can outpace the broader indices by a significant margin (see the details here).
Keeping this in mind, let’s take a glance at the new action regarding Ocean Rig UDW Inc (NASDAQ:ORIG).
What does the smart money think about Ocean Rig UDW Inc (NASDAQ:ORIG)?
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, James Dondero’s Highland Capital Management has the most valuable position in Ocean Rig UDW Inc (NASDAQ:ORIG), worth close to $32 million, accounting for 0.9% of its total 13F portfolio. Coming in second is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds an $18.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism include Joe Huber’s Huber Capital Management, Richard Rubin’s Hawkeye Capital and Israel Englander’s Millennium Management.
Because Ocean Rig UDW Inc (NASDAQ:ORIG) has experienced declining sentiment from the smart money, we can see that there exist a select few money managers who were dropping their full holdings last quarter. Intriguingly, Jonathan Barrett and Paul Segal’s Luminus Management sold off the biggest investment of the “upper crust” of funds followed by Insider Monkey, valued at about $8.6 million in stock. Christopher A. Winham’s fund, Tide Point Capital, also dropped its stock, about $8.6 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 fund last quarter.
Let’s go over hedge fund activity in other stocks similar to Ocean Rig UDW Inc (NASDAQ:ORIG). We will take a look at Martha Stewart Living Omnimedia, Inc. (NYSE:MSO), Mercantile Bank Corp. (NASDAQ:MBWM), Federated National Holding Co (NASDAQ:FNHC), and Advaxis, Inc. (NASDAQ:ADXS). This group of stocks’ market caps are closest to ORIG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MSO | 10 | 42863 | -6 |
| MBWM | 5 | 18590 | 0 |
| FNHC | 10 | 62800 | 0 |
| ADXS | 21 | 128831 | 8 |
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $77 million in ORIG’s case. Advaxis, Inc. (NASDAQ:ADXS) is the most popular stock in this table. On the other hand Mercantile Bank Corp. (NASDAQ:MBWM) is the least popular one with only 5 bullish hedge fund positions. Ocean Rig UDW Inc (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, ADXS might be a better candidate to consider a long position.
