Here Are Smart Money’s Favorite Offshore Drilling Bets

#3 ENSCO PLC (NYSE:ESV)

– Number of Hedge Fund Holders (as of March 31): 29
– Total Value of Hedge Fund Holdings (as of March 31): $275.81 million
– Hedge Fund Holdings as Percentage of Float (as of March 31): 11.30%

Analysts are pretty divided on ENSCO. Of the 27 analysts covering the stock, seven have ‘Sell’ ratings, fifteen have ‘Hold’ ratings, and five have ‘Buy’ ratings. Analysts at Bank of America recently initiated coverage on the stock, rating the stock ‘Underperform’, but assigning Ensco a price target of $10.53 per share, or roughly 2% higher than the market price at Friday’s close. Hedge funds are less divided. 29 elite funds were long ENSCO PLC (NYSE:ESV) at the end of the first quarter, up 6 from the previous quarter.

#2 Diamond Offshore Drilling Inc (NYSE:DO)

– Number of Hedge Fund Holders (as of March 31): 32
– Total Value of Hedge Fund Holdings (as of March 31): $207.3 million
– Hedge Fund Holdings as Percentage of Float (as of March 31): 7.00%

With a debt-to-equity ratio of 0.47, Diamond Offshore Drilling Inc (NYSE:DO) is one of the least levered companies in the sector. Although its shares won’t likely rally as much if crude prices spike, Diamond Offshore’s stock isn’t as risky as the more levered names either. The lower risk and the exposure to a potential crude rebound made the stock a fit for 32 funds tracked by us at the end of the first quarter, up by 10 from the previous quarter. Analysts see better times ahead, with an expected next-year EPS of $0.93, versus the company’s trailing twelve month EPS of $0.50.

#1 Transocean LTD (NYSE:RIG)

– Number of Hedge Fund Holders (as of March 31): 39
– Total Value of Hedge Fund Holdings (as of March 31): $597.67 million
– Hedge Fund Holdings as Percentage of Float (as of March 31): 18.00%

With 39 funds from our database holding shares in the company at the end of March, Transocean LTD (NYSE:RIG) is the smart money’s favorite stock in this list. Due to the crude crash, shares of Transocean have been beaten up and now trade at just 0.28-times book value. If Brent prices continue to rally higher, the demand for offshore rigs will increase, and the market value of those rigs will rise. As the market value of the rigs rise, Transocean’s price-to-book ratio will likely increase too. Although shares of Transocean have lagged its peers year-to-date, they could potentially do better once the stock rises above the 200-day simple moving average (SMA).

Disclosure: none