Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Valeant and SunEdison, have not done well during the last 12 months due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average. The top 30 mid-cap stocks (market caps between $1 billion and $10 billion) among hedge funds delivered an average return of 18% during the last four quarters. S&P 500 Index returned only 7.6% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds and billionaire investors think before doing extensive research on a stock. In this article, we take a closer look at Transocean LTD (NYSE:RIG) from the perspective of those elite funds.
Transocean LTD (NYSE:RIG) has seen an increase in activity from the world’s largest hedge funds recently. At the end of this article we will also compare RIG to other stocks including AmeriGas Partners, L.P. (NYSE:APU), Banco Macro SA (ADR) (NYSE:BMA), and MSC Industrial Direct Co Inc (NYSE:MSM) to get a better sense of its popularity.
Follow Transocean Ltd. (NYSE:RIG)
Follow Transocean Ltd. (NYSE:RIG)
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.
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Now, we’re going to take a glance at the recent action encompassing Transocean LTD (NYSE:RIG).
Hedge fund activity in Transocean LTD (NYSE:RIG)
Heading into the fourth quarter of 2016, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the second quarter of 2016. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Robert Pitts’ Steadfast Capital Management has the number one position in Transocean LTD (NYSE:RIG), worth close to $156.1 million, accounting for 2.8% of its total 13F portfolio. Sitting at the No. 2 spot is Senator Investment Group, managed by Doug Silverman and Alexander Klabin, which holds a $80 million position; 1.1% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism consist of Cliff Asness’ AQR Capital Management, D. E. Shaw’s D E Shaw and Jim Simons’ Renaissance Technologies.
As one would reasonably expect, key money managers have been driving this bullishness. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, initiated the most outsized position in Transocean LTD (NYSE:RIG). Senator Investment Group had $80 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $10.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Todd J. Kantor’s Encompass Capital Advisors, Benjamin A. Smith’s Laurion Capital Management, and Ken Griffin’s Citadel Investment Group.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Transocean LTD (NYSE:RIG) but similarly valued. These stocks are AmeriGas Partners, L.P. (NYSE:APU), Banco Macro SA (ADR) (NYSE:BMA), MSC Industrial Direct Co Inc (NYSE:MSM), and DCT Industrial Trust Inc. (NYSE:DCT). This group of stocks’ market valuations are closest to RIG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| APU | 8 | 5691 | 3 |
| BMA | 18 | 148895 | 2 |
| MSM | 21 | 555966 | -5 |
| DCT | 9 | 113662 | -3 |
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $206 million. That figure was $457 million in RIG’s case. MSC Industrial Direct Co Inc (NYSE:MSM) is the most popular stock in this table. On the other hand AmeriGas Partners, L.P. (NYSE:APU) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Transocean LTD (NYSE:RIG) 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.
