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Did Hedge Funds Drop The Ball On Ensco Rowan plc (ESV) ?

Nina Todic

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors' consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by more than 6 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Ensco Rowan plc (NYSE:ESV) from the perspective of those elite funds.

Ensco Rowan plc (NYSE:ESV) investors should pay attention to a decrease in hedge fund interest lately. Our calculations also showed that esv isn't among the 30 most popular stocks among hedge funds.

In the 21st century investor’s toolkit there are dozens of metrics stock traders can use to value stocks. A pair of the most underrated metrics are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can outperform the market by a significant amount (see the details here).

Jonathan Barrett Luminus Management

Let's analyze the latest hedge fund action surrounding Ensco Rowan plc (NYSE:ESV).

What have hedge funds been doing with Ensco Rowan plc (NYSE:ESV)?

At the end of the first quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -38% from the fourth quarter of 2018. By comparison, 20 hedge funds held shares or bullish call options in ESV a year ago. With hedgies' sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

No of Hedge Funds with EV Positions

The largest stake in Ensco Rowan plc (NYSE:ESV) was held by Orbis Investment Management, which reported holding $73.3 million worth of stock at the end of March. It was followed by Luminus Management with a $68 million position. Other investors bullish on the company included Greenlight Capital, Millennium Management, and TVR Capital.

Due to the fact that Ensco Rowan plc (NYSE:ESV) has witnessed falling interest from the smart money, it's safe to say that there were a few funds that decided to sell off their full holdings by the end of the third quarter. It's worth mentioning that Shane Finemore's Manikay Partners sold off the largest investment of the "upper crust" of funds tracked by Insider Monkey, totaling about $15.2 million in stock, and Robert Emil Zoellner's Alpine Associates was right behind this move, as the fund dropped about $9.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 13 funds by the end of the third quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Ensco Rowan plc (NYSE:ESV) but similarly valued. These stocks are UP Fintech Holding Limited (NASDAQ:TIGR), Zai Lab Limited (NASDAQ:ZLAB), Fanhua Inc. (NASDAQ:FANH), and Meritage Homes Corp (NYSE:MTH). This group of stocks' market values are closest to ESV's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TIGR,9,13631,9 ZLAB,17,166562,1 FANH,10,15212,1 MTH,14,177350,1 Average,12.5,93189,3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $93 million. That figure was $248 million in ESV's case. Zai Lab Limited (NASDAQ:ZLAB) is the most popular stock in this table. On the other hand UP Fintech Holding Limited (NASDAQ:TIGR) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Ensco Rowan plc (NYSE:ESV) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on ESV as the stock returned 132.6% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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