George Soros Giving Up On This Struggling Company, While Adage Capital Moves In On This Offshore Driller

Most hedge funds and other investors will be waiting for the third quarter earnings reports to pour in prior to rebalancing their portfolios, but some may have decided to do that before seeing where the market is heading. Adage Capital Partners L.P., founded by Phillip Gross and Robert Atchinson, reported owning 8.51 million shares or 5.29% of Ocean Rig UDW Inc. (NASDAQ:ORIG) via a recently-submitted 13G filing. This denotes a lift of 1.36 million shares to the position disclosed in its 13F filing for the June quarter. In a separate freshly-amended 13G filing, George Soros’ Soros Fund Management disclosed trimming its stake in Quantum Corp (NYSE:QTM) to 3.27 million shares, which account for 1.25% of the company’s outstanding common stock. George Soros’ family office revealed a 5.37 million-share stake in the big data and data protection specialist in its latest 13F filing with the SEC.

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For those of you who do not know too much about Phill Gross and Robert Atchinson’s firm, Adage Capital Partners L.P. is a hedge fund launched with a $3.8 billion commitment from Harvard Management Company in 2001. The Boston-based investment firm primarily employs a long/short equity strategy across different industries. Adage Capital also utilizes fundamental intra-industry approaches when analyzing investment opportunities, which have turned out to be quite successful over the years. The overall value of the investment firm’s public equity portfolio at the end of the second quarter added up to $40.10 billion.

Offshore drilling contractor Ocean Rig UDW Inc. (NASDAQ:ORIG) has had a rough year in terms of both stock performance and actual performance. The market Ocean Rig operates in has been challenging thus far and continues to be so, as numerous oil companies have been forced to implement colossal spending cuts. Therefore, the company has refocused its main goals on preserving its cash and maintaining liquidity. The shares of Ocean Rig UDW have lost more than 71% since the beginning of the year, so Adage Capital Partners may be betting on a turnaround for the struggling energy industry. If the offshore drilling contractor can survive this environment, the future holds a lot of bright spots considering that the oil industry is set to rebound sooner or later. In the meantime, 16 hedge funds tracked by Insider Monkey had positions in the stock at the end of the second quarter, compared with 13 registered in the prior one. Similarly, the value of these positions increased to $207.88 million from $189.5 million quarter-over-quarter. Let’s not forget to mention that these hedge funds collectively own 25.20% of the company’s outstanding stock as of June 30, which clearly points to the fact that the smart money has faith in the future prospects of Ocean Rig UDW. James Dondero’s Highland Capital Management is the largest shareholder of Ocean Rig in our database, with 15.0 million shares.

Let’s now provide a brief introduction to Soros Fund Management prior to diving into the story of Quantum Corp. George Soros’ family office was established in 1969 and is currently overseen by Chief Investment Officer Scott Bessent. Soros, one the greatest hedge fund managers in history, retired back in 2011 after returning the external capital his fund managed to investors. Soros does still participates in the firm’s decision making process even though he is not fully involved in its daily operations. According to its 13F filing for the June quarter, Soros Fund Management oversees a public equity portfolio with a market value of $10.75 billion.

It appears that Quantum Corp (NYSE:QTM) has serious problems weighing it down, so Soros Fund Management is trimming its stake in the expert in scale-out storage, and archive and data protection. Earlier this week, the company was notified by the New York Stock Exchange that it was no longer complying with NYSE’s listing standard that requires stocks to trade above the minimum average closing price of $1.00 for 30 trading sessions. In fact, the stock has lost 56% since the beginning of the year and there are no serious indicators that might suggest a rebound. Just recently, Quantum announced the reduction of its second quarter of fiscal 2016 revenue guidance to the range of $116 million-to-$118 million, which was lowered by roughly 2-3% from the previously-announced guidance. However, this downgrade comes despite higher-than-expected demand for its products, so the company was not able to complete the production of all orders received.

The hedge fund sentiment on the stock did not change at all during the second quarter, with the number of top money managers invested in Quantum remaining unchanged at 24. The hedge funds stockpiled 30.00% of the company’s shares at the end of June, which could suggest that the smart money still believes in the company. The value of their investments in the stock increased during the three-month period to $130.35 million from $121.36 million. Jeffrey Smith’s Starboard Value reported owning 25.70 million shares of Quantum Corp (NYSE:QTM) in its 13F filing for the June quarter.

Disclosure: None