Is North Atlantic Drilling Ltd. (NYSE:NADL) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to find the latest market-moving information.
North Atlantic Drilling Ltd. (NYSE:NADL) shareholders have witnessed a decrease in enthusiasm from smart money lately. North Atlantic Drilling Ltd. (NYSE:NADL) was in 4 hedge funds’ portfolios at the end of the third quarter of 2015. There were 5 hedge funds in our database with North Atlantic Drilling Ltd. (NYSE:NADL) positions at the end of the previous quarter. It is important to note that the shares of North Atlantic Drilling Ltd. lost 35.29% value during the third quarter, reflecting a bearish market sentiment. In order to understand more about the hedge fund sentiment, we will cover hedge funds that held stakes in North Atlantic Drilling Ltd. (NYSE:NADL), at the end of the third quarter.
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 New America High Income Fund Inc. (NYSE:HYB), Cutera, Inc. (NASDAQ:CUTR), and Garnero Group Acquisition Co (NASDAQ:GGAC) to gather more data points.
In the eyes of most stock holders, hedge funds are assumed to be underperforming, outdated financial tools of years past. While there are greater than 8000 funds trading at present, our experts hone in on the top tier of this group, around 700 funds. These money managers oversee the lion’s share of all hedge funds’ total capital, and by tailing their first-class investments, Insider Monkey has revealed various investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Now, we’re going to take a look at the new action encompassing North Atlantic Drilling Ltd. (NYSE:NADL).
What have hedge funds been doing with North Atlantic Drilling Ltd. (NYSE:NADL)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 20% from the previous quarter. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Prescott Group Capital Management, managed by Phil Frohlich, holds the most valuable position in North Atlantic Drilling Ltd. (NYSE:NADL). Prescott Group Capital Management has a $3 million position in the stock, comprising 0.7% of its 13F portfolio. Coming in second is John Thiessen of Vertex One Asset Management, with a $1.7 million position; 0.2% of its 13F portfolio is allocated to the company. Remaining peers with similar optimism contain Ken Griffin’s Citadel Investment Group, and Renaissance Technologies.
Due to the fact that North Atlantic Drilling Ltd. (NYSE:NADL) has experienced a falling interest from hedge fund managers, we can see that there were a few hedge funds that slashed their full holdings heading into Q4. Interestingly, Israel Englander’s Millennium Management cut the biggest position of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $1 million in call options., and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund sold off about $30,000 worth. These moves are interesting, as aggregate hedge fund interest dropped by 1 fund heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as North Atlantic Drilling Ltd. (NYSE:NADL) but similarly valued. We will take a look at New America High Income Fund Inc. (NYSE:HYB), Cutera, Inc. (NASDAQ:CUTR), Garnero Group Acquisition Co (NASDAQ:GGAC), and Clearfield, Inc. (NASDAQ:CLFD). This group of stocks’ market values match North Atlantic Drilling Ltd. (NYSE:NADL)’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HYB | 4 | 6739 | 1 |
| CUTR | 13 | 43723 | -3 |
| GGAC | 7 | 25329 | 1 |
| CLFD | 7 | 9766 | 2 |
As you can see, these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $5 million in North Atlantic Drilling Ltd. (NYSE:NADL)’s case. Cutera, Inc. (NASDAQ:CUTR) is the most popular stock in this table. On the other hand, New America High Income Fund Inc. (NYSE:HYB) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks, North Atlantic Drilling Ltd. (NYSE:NADL) is even less popular than New America High Income Fund Inc. (NYSE:HYB). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.