Hedge funds are not perfect. They have their bad picks just like everyone else. Micron, a stock hedge funds have loved, lost 50% during the last 12 months ending in October 30. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% in the same time period, vs. a gain of 5.2% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Seadrill Ltd (NYSE:SDRL).
Is Seadrill Ltd (NYSE:SDRL) a buy right now? Money managers are getting more optimistic. The number of bullish hedge fund positions advanced by 5 lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Waddell & Reed Financial, Inc. (NYSE:WDR), SunPower Corporation (NASDAQ:SPWR), and John Wiley & Sons Inc (NYSE:JW) to gather more data points.
Follow Seadrill Ltd (NYSE:SDRL)
Follow Seadrill Ltd (NYSE:SDRL)
If you’d ask most traders, hedge funds are viewed as worthless, old investment vehicles of the past. While there are greater than an 8000 funds in operation at the moment, We look at the top tier of this club, around 700 funds. It is estimated that this group of investors manage the lion’s share of the smart money’s total asset base, and by tailing their best picks, Insider Monkey has spotted many investment strategies that have historically outstripped the market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Keeping this in mind, we’re going to analyze the new action encompassing Seadrill Ltd (NYSE:SDRL).
Hedge fund activity in Seadrill Ltd (NYSE:SDRL)
Heading into Q4, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 28% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Anand Parekh’s Alyeska Investment Group has the most valuable position in Seadrill Ltd (NYSE:SDRL), worth close to $20.9 million, accounting for 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, with a $17.5 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that hold long positions include Philip Rosenstrach’s Pomelo Capital and Neil Chriss’s Hutchin Hill Capital.
Consequently, key hedge funds have been driving this bullishness. Alyeska Investment Group assembled the most outsized position in Seadrill Ltd (NYSE:SDRL). Alyeska Investment Group had $20.9 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $14.9 million investment in the stock during the quarter. The other funds with brand new SDRL positions are Neil Chriss’s Hutchin Hill Capital, Robert Vollero and Gentry T. Beach’s Vollero Beach Capital Partners, and Benjamin A. Smith’s Laurion Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Seadrill Ltd (NYSE:SDRL). We will take a look at Waddell & Reed Financial, Inc. (NYSE:WDR), SunPower Corporation (NASDAQ:SPWR), John Wiley & Sons Inc (NYSE:JW), and Columbia Property Trust Inc (NYSE:CXP). This group of stocks’ market valuations are closest to SDRL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WDR | 16 | 172696 | 3 |
| SPWR | 20 | 102237 | 3 |
| JW | 15 | 112973 | -7 |
| CXP | 9 | 237795 | -3 |
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $156 million, versus $109 million in SDRL’s case. SunPower Corporation (NASDAQ:SPWR) is the most popular stock in this table. On the other hand Columbia Property Trust Inc (NYSE:CXP) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Seadrill Ltd (NYSE:SDRL) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
