It was a rough third quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during the quarter. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 14 percentage points between June 25 and October 30, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Diamond Offshore Drilling Inc (NYSE:DO) during the quarter below.
Diamond Offshore Drilling Inc (NYSE:DO) has experienced an increase in hedge fund interest recently. At the end of this article, we will also compare Diamond Offshore Drilling Inc (NYSE:DO) to other stocks, including IMAX Corporation (USA) (NYSE:IMAX), Franks International NV (NYSE:FI), and NuVasive, Inc. (NASDAQ:NUVA) to get a better sense of its popularity.
Follow Diamond Offshore Drilling Inc. (NYSE:DO)
Follow Diamond Offshore Drilling Inc. (NYSE:DO)
If you’d ask most investors, hedge funds are seen as slow, old investment tools of the past. While there are over 8000 funds trading today, our researchers choose to focus on the leaders of this club, about 700 funds. Most estimates calculate that this group of people administers the majority of the smart money’s total capital, and by tailing their best equity investments, Insider Monkey has uncovered various investment strategies that have historically outpaced Mr. Market. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points annually for a decade in their back tests.
With all of this in mind, we’re going to take a peek at the fresh action encompassing Diamond Offshore Drilling Inc (NYSE:DO).
How have hedgies been trading Diamond Offshore Drilling Inc (NYSE:DO)?
At the end of September, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 30% from the second quarter. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Israel Englander’s Millennium Management has the biggest position in Diamond Offshore Drilling Inc (NYSE:DO), worth close to $57.6 million, comprising 0.1% of its total 13F portfolio. The second most bullish fund manager is Citadel Investment Group, led by Ken Griffin, holding a $16.4 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish consist of Chuck Royce’s Royce & Associates, Robert Pitts’ Steadfast Capital Management, and George Hall’s Clinton Group.
As industrywide interest jumped, key money managers have jumped into Diamond Offshore Drilling Inc (NYSE:DO) headfirst. Millennium Management, managed by Israel Englander, established the most valuable position in Diamond Offshore Drilling Inc (NYSE:DO). Millennium Management had $57.6 million invested in the company at the end of the quarter. Robert Vollero and Gentry T. Beach’s Vollero Beach Capital Partners also initiated a $5.7 million position during the quarter. The other funds with new positions in the stock are Jonathan Barrett and Paul Segal’s Luminus Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Diamond Offshore Drilling Inc (NYSE:DO) but similarly valued. We will take a look at IMAX Corporation (USA) (NYSE:IMAX), Franks International NV (NYSE:FI), NuVasive, Inc. (NASDAQ:NUVA), and HRG Group Inc (NYSE:HRG). All of these stocks’ market caps are similar to Diamond Offshore Drilling Inc (NYSE:DO)’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IMAX | 20 | 136436 | -1 |
| FI | 12 | 35734 | -5 |
| NUVA | 37 | 622078 | 1 |
| HRG | 26 | 1667547 | 0 |
As you can see, these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $615 million. That figure was $132 million in Diamond Offshore Drilling Inc (NYSE:DO)’s case. NuVasive, Inc. (NASDAQ:NUVA) is the most popular stock in this table. On the other hand, Franks International NV (NYSE:FI) is the least popular one with only 12 bullish hedge fund positions. Diamond Offshore Drilling Inc (NYSE:DO) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, NuVasive, Inc. (NASDAQ:NUVA) might be a better candidate to consider a long position.
