Where Do Hedge Funds Stand On Borr Drilling Limited (BORR)?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Borr Drilling Limited (NYSE:BORR).

Borr Drilling Limited (NYSE:BORR) was in 6 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 6. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. BORR investors should pay attention to an increase in hedge fund interest in recent months. There were 3 hedge funds in our database with BORR positions at the end of the fourth quarter. Our calculations also showed that BORR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a look at the latest hedge fund action surrounding Borr Drilling Limited (NYSE:BORR).

Do Hedge Funds Think BORR Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from the fourth quarter of 2020. By comparison, 3 hedge funds held shares or bullish call options in BORR a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, William B. Gray’s Orbis Investment Management has the largest position in Borr Drilling Limited (NYSE:BORR), worth close to $2.2 million, comprising less than 0.1%% of its total 13F portfolio. On Orbis Investment Management’s heels is Renaissance Technologies, holding a $0.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions comprise John Overdeck and David Siegel’s Two Sigma Advisors, Ken Griffin’s Citadel Investment Group and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Orbis Investment Management allocated the biggest weight to Borr Drilling Limited (NYSE:BORR), around 0.02% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, earmarking 0.0011 percent of its 13F equity portfolio to BORR.

With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, created the biggest position in Borr Drilling Limited (NYSE:BORR). Citadel Investment Group had $0.3 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0 million investment in the stock during the quarter. The only other fund with a new position in the stock is Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s check out hedge fund activity in other stocks similar to Borr Drilling Limited (NYSE:BORR). We will take a look at Lee Enterprises, Incorporated (NASDAQ:LEE), Ardmore Shipping Corp (NYSE:ASC), Champions Oncology, Inc. (NASDAQ:CSBR), Dyadic International, Inc. (NASDAQ:DYAI), X4 Pharmaceuticals, Inc. (NASDAQ:XFOR), First Community Corporation (NASDAQ:FCCO), and Lyra Therapeutics, Inc. (NASDAQ:LYRA). This group of stocks’ market values resemble BORR’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.9 hedge funds with bullish positions and the average amount invested in these stocks was $22 million. That figure was $3 million in BORR’s case. X4 Pharmaceuticals, Inc. (NASDAQ:XFOR) is the most popular stock in this table. On the other hand Champions Oncology, Inc. (NASDAQ:CSBR) is the least popular one with only 2 bullish hedge fund positions. Borr Drilling Limited (NYSE:BORR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BORR is 60.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and beat the market again by 4.8 percentage points. Unfortunately BORR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BORR were disappointed as the stock returned -11.1% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.