Should You Buy Unit Corporation (UNT)?

Unit Corporation (NYSE:UNT) was in 12 hedge funds’ portfolio at the end of the first quarter of 2013. UNT investors should be aware of an increase in enthusiasm from smart money in recent months. There were 10 hedge funds in our database with UNT holdings at the end of the previous quarter.

According to most investors, hedge funds are seen as slow, old investment vehicles of years past. While there are over 8000 funds with their doors open today, we at Insider Monkey choose to focus on the elite of this group, about 450 funds. Most estimates calculate that this group controls most of all hedge funds’ total capital, and by monitoring their highest performing equity investments, we have unsheathed a few investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Just as key, positive insider trading activity is another way to break down the financial markets. As the old adage goes: there are many incentives for an executive to drop shares of his or her company, but only one, very obvious reason why they would behave bullishly. Plenty of academic studies have demonstrated the impressive potential of this tactic if “monkeys” know where to look (learn more here).

Consequently, let’s take a gander at the recent action surrounding Unit Corporation (NYSE:UNT).

Hedge fund activity in Unit Corporation (NYSE:UNT)

In preparation for this quarter, a total of 12 of the hedge funds we track were bullish in this stock, a change of 20% from one quarter earlier. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings considerably.

According to our comprehensive database, Royce & Associates, managed by Chuck Royce, holds the largest position in Unit Corporation (NYSE:UNT). Royce & Associates has a $318.3 million position in the stock, comprising 1% of its 13F portfolio. On Royce & Associates’s heels is AQR Capital Management, managed by Cliff Asness, which held a $10 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds that hold long positions include Jim Simons’s Renaissance Technologies, D. E. Shaw’s D E Shaw and Paul Tudor Jones’s Tudor Investment Corp.

Consequently, specific money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the most valuable position in Unit Corporation (NYSE:UNT). Millennium Management had 0.6 million invested in the company at the end of the quarter. Mike Vranos’s Ellington also made a $0.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Glenn Russell Dubin’s Highbridge Capital Management, Matthew Hulsizer’s PEAK6 Capital Management, and David Costen Haley’s HBK Investments.

Insider trading activity in Unit Corporation (NYSE:UNT)

Insider purchases made by high-level executives is most useful when the company in focus has experienced transactions within the past half-year. Over the last 180-day time period, Unit Corporation (NYSE:UNT) has seen zero unique insiders buying, and 5 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Unit Corporation (NYSE:UNT). These stocks are BreitBurn Energy Partners L.P. (NASDAQ:BBEP), Kodiak Oil & Gas Corp (USA) (NYSE:KOG), Ocean Rig UDW Inc (NASDAQ:ORIG), EV Energy Partners, L.P. (NASDAQ:EVEP), and Pacific Drilling SA (NYSE:PACD). All of these stocks are in the oil & gas drilling & exploration industry and their market caps are similar to UNT’s market cap.

With the results demonstrated by the aforementioned studies, everyday investors should always watch hedge fund and insider trading sentiment, and Unit Corporation (NYSE:UNT) shareholders fit into this picture quite nicely.

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