Hedge Funds Are Crazy About Seadrill Ltd (SDRL)

Seadrill Ltd (NYSE:SDRL) investors should be aware of an increase in support from the world’s most elite money managers lately.

If you’d ask most stock holders, hedge funds are viewed as underperforming, old investment vehicles of the past. While there are greater than 8000 funds trading at the moment, we choose to focus on the bigwigs of this group, close to 450 funds. It is widely believed that this group oversees the majority of all hedge funds’ total capital, and by watching their highest performing equity investments, we have brought to light a number of investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started 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 all of our picks from August).

Equally as integral, optimistic insider trading activity is another way to break down the investments you’re interested in. Obviously, there are many incentives for an executive to drop shares of his or her company, but only one, very clear reason why they would initiate a purchase. Plenty of academic studies have demonstrated the impressive potential of this tactic if “monkeys” know where to look (learn more here).

With all of this in mind, we’re going to take a peek at the latest action regarding Seadrill Ltd (NYSE:SDRL).

How are hedge funds trading Seadrill Ltd (NYSE:SDRL)?

Heading into Q2, a total of 20 of the hedge funds we track were bullish in this stock, a change of 5% from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably.

Of the funds we track, Jim Simons’s Renaissance Technologies had the most valuable position in Seadrill Ltd (NYSE:SDRL), worth close to $173.1 million, comprising 0.4% of its total 13F portfolio. Sitting at the No. 2 spot is John Overdeck and David Siegel of Two Sigma Advisors, with a $39.6 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Some other hedge funds with similar optimism include George Soros’s Soros Fund Management, Richard L. Haydon’s Yield Capital Partners (Y/Cap Management) and Matthew Hulsizer’s PEAK6 Capital Management.

As industrywide interest jumped, some big names have jumped into Seadrill Ltd (NYSE:SDRL) headfirst. Soros Fund Management, managed by George Soros, established the most valuable position in Seadrill Ltd (NYSE:SDRL). Soros Fund Management had 13.4 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $5.8 million investment in the stock during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw and Cliff Asness’s AQR Capital Management.

What do corporate executives and insiders think about Seadrill Ltd (NYSE:SDRL)?

Insider trading activity, especially when it’s bullish, is at its handiest when the company we’re looking at has experienced transactions within the past 180 days. Over the last half-year time frame, Seadrill Ltd (NYSE:SDRL) has seen zero unique insiders purchasing, and zero 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 Seadrill Ltd (NYSE:SDRL). 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 Transocean LTD (NYSE:RIG). This group of stocks belong to the oil & gas drilling & exploration industry and their market caps match SDRL’s market cap.