Hedge Funds Are Betting On McDermott International (MDR)

Is McDermott International (NYSE:MDR) a marvelous investment right now? Money managers are getting more optimistic. The number of long hedge fund bets increased by 1 in recent months.

To most shareholders, hedge funds are assumed to be unimportant, outdated financial vehicles of years past. While there are more than 8000 funds trading at present, we at Insider Monkey hone in on the moguls of this group, around 450 funds. It is widely believed that this group controls most of the smart money’s total capital, and by watching their best picks, we have uncovered a number of investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 23.3 percentage points in 8 months (see the details here).

Just as integral, optimistic insider trading sentiment is a second way to break down the marketplace. There are a variety of reasons for a bullish insider to sell shares of his or her company, but just one, very simple reason why they would buy. Many academic studies have demonstrated the impressive potential of this strategy if shareholders know what to do (learn more here).

With all of this in mind, it’s important to take a look at the key action surrounding McDermott International (NYSE:MDR).

How have hedgies been trading McDermott International (NYSE:MDR)?

In preparation for this quarter, a total of 18 of the hedge funds we track held long positions in this stock, a change of 6% from the previous quarter. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly.

According to our comprehensive database, Israel Englander’s Millennium Management had the most valuable position in McDermott International (NYSE:MDR), worth close to $65.9 million, accounting for 0.3% of its total 13F portfolio. Coming in second is Steven Cohen of SAC Capital Advisors, with a $26.7 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions include Cliff Asness’s AQR Capital Management, D. E. Shaw’s D E Shaw and John Overdeck and David Siegel’s Two Sigma Advisors.

Consequently, some big names were leading the bulls’ herd. Bryn Mawr Capital, managed by Ken Gray and Steve Walsh, initiated the most outsized position in McDermott International (NYSE:MDR). Bryn Mawr Capital had 3.6 million invested in the company at the end of the quarter. Malcolm Fairbairn’s Ascend Capital also initiated a $3.5 million position during the quarter. The following funds were also among the new MDR investors: Ken Brodkowitz and Mike Vermut’s Newland Capital and William Michaelcheck’s Mariner Investment Group.

How have insiders been trading McDermott International (NYSE:MDR)?

Insider buying is particularly usable when the company in question has seen transactions within the past six months. Over the latest half-year time frame, McDermott International (NYSE:MDR) has seen zero unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to McDermott International (NYSE:MDR). These stocks are Primoris Services Corp (NASDAQ:PRIM), Granite Construction Inc. (NYSE:GVA), MasTec, Inc. (NYSE:MTZ), and Foster Wheeler AG (NASDAQ:FWLT). This group of stocks belong to the heavy construction industry and their market caps are closest to MDR’s market cap.

With the returns demonstrated by the aforementioned research, retail investors should always monitor hedge fund and insider trading activity, and McDermott International (NYSE:MDR) is no exception.

Click here to learn why you should track hedge funds