Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Seadrill Ltd (NYSE:SDRL) has seen an increase in hedge fund sentiment recently. 18 hedge funds in our system owned shares of SDRL on September 30. There were 17 hedge funds in our database with SDRL positions at the end of the June 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 Infinera Corp. (NASDAQ:INFN), Travelport Worldwide Ltd (NYSE:TVPT), and CBL & Associates Properties, Inc. (NYSE:CBL) to gather more data points.
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Hedge fund activity in Seadrill Ltd (NYSE:SDRL)
Heading into the fourth quarter of 2016, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a rise of 6% from the previous quarter.The graph below displays the number of hedge funds with bullish positions in SDRL over the last 5 quarters, with the number of those positions generally trending down. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Himanshu H. Shah’s Shah Capital Management holds the most valuable position in Seadrill Ltd (NYSE:SDRL). Shah Capital Management has a $7.3 million position in the stock, comprising 4.1% of its 13F portfolio. On Shah Capital Management’s heels is Robert Henry Lynch of Aristeia Capital, with a $7 million position. Other professional money managers with similar optimism encompass Philippe Laffont’s Coatue Management and Philip Rosenstrach’s Pomelo Capital. We should note that two of these hedge funds (Shah Capital Management and Aristeia Capital) are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As industry-wide interest jumped, key money managers have been driving this bullishness. Ken Griffin’s Citadel Investment Group established the most outsized call position in Seadrill Ltd (NYSE:SDRL). Citadel Investment Group had $1.6 million invested in the holding at the end of the quarter. Boaz Weinstein’s Saba Capital also initiated a $0.5 million position during the quarter. The other funds with brand new SDRL positions are Joshua Packwood and Schuster Tanger’s Radix Partners, Benjamin A. Smith’s Laurion Capital Management, and Jim Simons’ Renaissance Technologies.
Let’s also examine hedge fund activity in other stocks similar to Seadrill Ltd (NYSE:SDRL). We will take a look at Infinera Corp. (NASDAQ:INFN), Travelport Worldwide Ltd (NYSE:TVPT), CBL & Associates Properties, Inc. (NYSE:CBL), and Aaron’s, Inc. (NYSE:AAN). All of these stocks’ market caps resemble SDRL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INFN | 17 | 67309 | 2 |
| TVPT | 26 | 465752 | -2 |
| CBL | 11 | 30247 | -7 |
| AAN | 25 | 288153 | 0 |
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $213 million. That figure was $34 million in SDRL’s case. Travelport Worldwide Ltd (NYSE:TVPT) is the most popular stock in this table. On the other hand CBL & Associates Properties, Inc. (NYSE:CBL) is the least popular one with only 11 bullish hedge fund positions. Seadrill Ltd (NYSE:SDRL) 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 TVPT might be a better candidate to consider taking a long position in.
Disclosure: None
