Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Rowan Companies plc (NYSE:RDC) was in 31 hedge funds’ portfolios at the end of September. RDC has seen an increase in hedge fund interest in recent months. There were 26 hedge funds in our database with RDC positions at the end of the previous quarter. Our calculations also showed that RDC isn’t among the 30 most popular stocks among hedge funds.
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 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a look at the key hedge fund action surrounding Rowan Companies plc (NYSE:RDC).
What does the smart money think about Rowan Companies plc (NYSE:RDC)?
At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from one quarter earlier. By comparison, 27 hedge funds held shares or bullish call options in RDC heading into this year. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
The largest stake in Rowan Companies plc (NYSE:RDC) was held by Odey Asset Management Group, which reported holding $210 million worth of stock at the end of September. It was followed by Canyon Capital Advisors with a $93.2 million position. Other investors bullish on the company included Centerbridge Partners, Millennium Management, and AQR Capital Management.
As industrywide interest jumped, specific money managers have jumped into Rowan Companies plc (NYSE:RDC) headfirst. Canyon Capital Advisors, managed by Joshua Friedman and Mitchell Julis, created the biggest position in Rowan Companies plc (NYSE:RDC). Canyon Capital Advisors had $93.2 million invested in the company at the end of the quarter. Brian J. Higgins’s King Street Capital also initiated a $45.2 million position during the quarter. The following funds were also among the new RDC investors: Anand Parekh’s Alyeska Investment Group, Jonathan Barrett and Paul Segal’s Luminus Management, and Scott Bessent’s Key Square Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Rowan Companies plc (NYSE:RDC) but similarly valued. We will take a look at WD-40 Company (NASDAQ:WDFC), BBVA Banco Frances S.A. (NYSE:BFR), G-III Apparel Group, Ltd. (NASDAQ:GIII), and GTT Communications Inc (NYSE:GTT). This group of stocks’ market caps are similar to RDC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WDFC | 10 | 154086 | 1 |
| BFR | 7 | 13619 | -1 |
| GIII | 17 | 273783 | -4 |
| GTT | 14 | 150070 | -2 |
| Average | 12 | 147890 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $148 million. That figure was $762 million in RDC’s case. G-III Apparel Group, Ltd. (NASDAQ:GIII) is the most popular stock in this table. On the other hand BBVA Banco Frances S.A. (NYSE:BFR) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Rowan Companies plc (NYSE:RDC) 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.
