There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Oceaneering International (NYSE:OII).
Is Oceaneering International (NYSE:OII) a buy here? Investors who are in the know are in a bearish mood. The number of bullish hedge fund bets decreased by 10 in recent months. OII was in 22 hedge funds’ portfolios at the end of September. There were 32 hedge funds in our database with OII positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as ENSCO PLC (NYSE:ESV), National Beverage Corp. (NASDAQ:FIZZ), and Prestige Brands Holdings, Inc. (NYSE:PBH) to gather more data points.
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.
Keeping this in mind, let’s view the latest action surrounding Oceaneering International (NYSE:OII).
How are hedge funds trading Oceaneering International (NYSE:OII)?
At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from the second quarter of 2016. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Cliff Asness’s quant hedge fund AQR Capital Management has the largest position in Oceaneering International (NYSE:OII), worth close to $42.2 million. The second most bullish fund manager is D E Shaw, another quant hedge fund, holding a $25.1 million position. Some other peers with similar optimism comprise billionaire Ken Fisher’s Fisher Asset Management, Joel Greenblatt’s Gotham Asset Management and Jim Simons’s Renaissance Technologies. Both Gotham and Rentech are quant funds and Ken Fisher invests in hundreds of stocks.
Seeing as Oceaneering International (NYSE:OII) has experienced falling interest from hedge fund managers, we can see that there lies a certain “tier” of fund managers that slashed their entire stakes heading into Q4. At the top of the heap, Brian Taylor’s Pine River Capital Management cut the biggest investment of all the hedgies followed by Insider Monkey, comprising about $6.7 million in stock, and Glenn Russell Dubin’s Highbridge Capital Management was right behind this move, as the fund dumped about $5.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 10 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Oceaneering International (NYSE:OII) but similarly valued. We will take a look at ENSCO PLC (NYSE:ESV), National Beverage Corp. (NASDAQ:FIZZ), Prestige Brands Holdings, Inc. (NYSE:PBH), and Metals USA Holdings Corp (NYSE:MUSA). This group of stocks’ market valuations are closest to OII’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 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $269 million. That figure was $166 million in OII’s case. ENSCO PLC (NYSE:ESV) is the most popular stock in this table. On the other hand Prestige Brands Holdings, Inc. (NYSE:PBH) is the least popular one with only 17 bullish hedge fund positions. Oceaneering International (NYSE:OII) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ESV might be a better candidate to consider a long position.