Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Hedge fund interest in Seadrill Partners LLC (NYSE:SDLP) shares was flat during the third quarter. This is usually a negative indicator. 7 hedge funds that we track owned the stock on September 30, same as on June 30. At the end of this article we will also compare SDLP to other stocks including American Software, Inc. (NASDAQ:AMSWA), Enova International Inc (NYSE:ENVA), and Monster Worldwide, Inc. (NYSE:MWW) to get a better sense of its popularity.
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What does the smart money think about Seadrill Partners LLC (NYSE:SDLP)?
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the second quarter of 2016. The graph below displays the number of hedge funds with bullish positions in SDLP over the last 5 quarters, which has remained within a narrow range. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Joshua Packwood and Schuster Tanger’s Radix Partners has the most valuable position in Seadrill Partners LLC (NYSE:SDLP), worth close to $0.4 million. The second most bullish fund manager is Gotham Asset Management, led by Joel Greenblatt, which holds a $0.3 million position. Other hedge funds and institutional investors that hold long positions contain Daniel S. Och’s OZ Management, Millennium Management, one of the largest hedge funds in the world, and David Costen Haley’s HBK Investments. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.
Because Seadrill Partners LLC (NYSE:SDLP) has faced declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedgies that elected to cut their entire stakes in the third quarter. Interestingly, Daniel S. Och’s OZ Management sold off the largest investment of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $0.2 million in call options, while retaining its aforementioned long position (though it greatly reduced the size of that position also). Dmitry Balyasny’s Balyasny Asset Management was right behind that move, as the fund dropped about $0.1 million worth of shares.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Seadrill Partners LLC (NYSE:SDLP) but similarly valued. These stocks are American Software, Inc. (NASDAQ:AMSWA), Enova International Inc (NYSE:ENVA), Monster Worldwide, Inc. (NYSE:MWW), and Nova Measuring Instruments Ltd. (NASDAQ:NVMI). This group of stocks’ market values resemble SDLP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMSWA | 5 | 23513 | 1 |
| ENVA | 21 | 74736 | 3 |
| MWW | 20 | 50220 | 1 |
| NVMI | 5 | 30424 | -1 |
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $2 million in SDLP’s case. Enova International Inc (NYSE:ENVA) is the most popular stock in this table. On the other hand American Software, Inc. (NASDAQ:AMSWA) is the least popular one with only 5 bullish hedge fund positions. Seadrill Partners LLC (NYSE:SDLP) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ENVA and MWW might be better candidates to consider taking a long position in.
Disclosure: None
