Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the third quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 20 stock picks outperformed the S&P 500 Index by 9.9 percentage points through the end of November. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Borr Drilling Limited (NYSE:BORR) has seen an increase in hedge fund sentiment recently. Our calculations also showed that BORR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most shareholders, hedge funds are assumed to be worthless, outdated investment tools of yesteryear. While there are more than 8000 funds in operation at present, We choose to focus on the masters of this club, approximately 750 funds. Most estimates calculate that this group of people have their hands on most of the smart money’s total capital, and by observing their unrivaled picks, Insider Monkey has determined several investment strategies that have historically outpaced Mr. Market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to analyze the latest hedge fund action surrounding Borr Drilling Limited (NYSE:BORR).
What does smart money think about Borr Drilling Limited (NYSE:BORR)?
Heading into the fourth quarter of 2019, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5 from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BORR over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Borr Drilling Limited (NYSE:BORR) was held by Pelham Capital, which reported holding $23.2 million worth of stock at the end of September. It was followed by Orbis Investment Management with a $12 million position. Other investors bullish on the company included Millennium Management, Citadel Investment Group, and BlueCrest Capital Mgmt.. In terms of the portfolio weights assigned to each position Pelham Capital allocated the biggest weight to Borr Drilling Limited (NYSE:BORR), around 2.6% of its 13F portfolio. Orbis Investment Management is also relatively very bullish on the stock, designating 0.09 percent of its 13F equity portfolio to BORR.
As one would reasonably expect, key money managers have been driving this bullishness. Pelham Capital, managed by Ross Turner, established the largest position in Borr Drilling Limited (NYSE:BORR). Pelham Capital had $23.2 million invested in the company at the end of the quarter. William B. Gray’s Orbis Investment Management also made a $12 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Borr Drilling Limited (NYSE:BORR) but similarly valued. We will take a look at UMH Properties, Inc (NYSE:UMH), Textainer Group Holdings Limited (NYSE:TGH), Collier Creek Holdings (NYSE:CCH), and The York Water Company (NASDAQ:YORW). This group of stocks’ market values match BORR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UMH | 8 | 13726 | -1 |
| TGH | 9 | 20758 | 2 |
| CCH | 18 | 153166 | -1 |
| YORW | 7 | 22922 | 2 |
| Average | 10.5 | 52643 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $36 million in BORR’s case. Collier Creek Holdings (NYSE:CCH) is the most popular stock in this table. On the other hand The York Water Company (NASDAQ:YORW) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Borr Drilling Limited (NYSE:BORR) is even less popular than YORW. Hedge funds clearly dropped the ball on BORR as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on BORR as the stock returned 23.9% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.