Should You Avoid Transocean LTD (RIG)?

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Transocean LTD (NYSE:RIG) has seen some intriguing data from one sect of the market lately.

In today’s marketplace, there are a multitude of metrics shareholders can use to track stocks. A couple of the best are hedge fund and insider trading sentiment. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the elite investment managers can outclass the S&P 500 by a very impressive margin (see just how much).

Transocean LTD (NYSE:RIG)

Equally as crucial, optimistic insider trading activity is a second way to look at the stock market universe. Just as you’d expect, there are a number of reasons for a corporate insider to get rid of shares of his or her company, but only one, very simple reason why they would buy. Plenty of empirical studies have demonstrated the valuable potential of this tactic if “monkeys” know what to do (learn more here).

Now that that’s out of the way, we’re going to discuss the recent info surrounding Transocean LTD (NYSE:RIG).

What does the smart money think about Transocean LTD (NYSE:RIG)?

At the end of the second quarter, a total of 41 of the hedge funds we track were bullish in this stock, a change of -15% from the first quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings substantially.

Out of the hedge funds we follow, Carl Icahn’s Icahn Capital LP had the biggest position in Transocean LTD (NYSE:RIG), worth close to $1.0299 billion, comprising 4.8% of its total 13F portfolio. Sitting at the No. 2 spot is Clint Carlson of Carlson Capital, with a $168.7 million position; 2% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism include Leon Cooperman’s Omega Advisors, David Tepper’s Appaloosa Management LP and Ken Griffin’s Citadel Investment Group.

Since Transocean LTD (NYSE:RIG) has experienced bearish sentiment from upper-tier hedge fund managers, it’s easy to see that there lies a certain “tier” of money managers that decided to sell off their entire stakes last quarter. Interestingly, Glenn Russell Dubin’s Highbridge Capital Management cut the biggest stake of the 450+ funds we key on, valued at about $150.8 million in stock, and Daniel Lewis of Orange Capital was right behind this move, as the fund dropped about $39 million worth. These moves are interesting, as total hedge fund interest was cut by 7 funds last quarter.

Insider trading activity in Transocean LTD (NYSE:RIG)

Insider buying made by high-level executives is particularly usable when the company we’re looking at has experienced transactions within the past 180 days. Over the latest 180-day time period, Transocean LTD (NYSE:RIG) has experienced zero unique insiders purchasing, and 3 insider sales (see the details of insider trades here).

We’ll also review the relationship between both of these indicators in other stocks similar to Transocean LTD (NYSE:RIG). These stocks are Diamond Offshore Drilling Inc (NYSE:DO), Concho Resources Inc. (NYSE:CXO), Cenovus Energy Inc (USA) (NYSE:CVE), ENSCO PLC (NYSE:ESV), and Seadrill Ltd (NYSE:SDRL). All of these stocks are in the oil & gas drilling & exploration industry and their market caps are closest to RIG’s market cap.

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