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Is Noble Corporation plc (NE) A Good Stock To Buy?

Reymerlyn Martin

"Market conditions are changing. The continued rise in interest rates suggests we are in the early stages of a bond bear market, which could intensify as central banks withdraw liquidity. The receding tide of liquidity will start to reveal more rocks beyond what has been exposed in emerging markets so far, and the value of a value discipline will be in avoiding the biggest capital-destroying rocks. If a rock emerges on the crowded shore of U.S. momentum, it could result in a major liquidity challenge, as momentum is often most intense on the downside as a crowded trade reverses. So investors are facing a large potential trade-off right now: continue to bet on the current dominance of momentum and the S&P 500, or bet on change and take an active value bet in names with attractive value and optionality, but with negative momentum," said Clearbridge Investments in its market commentary. We aren't sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Noble Corporation plc (NYSE:NE).

Noble Corporation plc (NYSE:NE) investors should pay attention to an increase in hedge fund sentiment recently. Our calculations also showed that NE isn't among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jonathan Barrett Luminus Management

We're going to take a peek at the fresh hedge fund action encompassing Noble Corporation plc (NYSE:NE).

Hedge fund activity in Noble Corporation plc (NYSE:NE)

At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the previous quarter. By comparison, 17 hedge funds held shares or bullish call options in NE a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

NE_may2019

The largest stake in Noble Corporation plc (NYSE:NE) was held by Firefly Value Partners, which reported holding $43.5 million worth of stock at the end of December. It was followed by Luminus Management with a $13.8 million position. Other investors bullish on the company included DC Capital Partners, Blue Mountain Capital, and Brigade Capital.

Consequently, key money managers have been driving this bullishness. Luminus Management, managed by Jonathan Barrett and Paul Segal, assembled the most outsized position in Noble Corporation plc (NYSE:NE). Luminus Management had $13.8 million invested in the company at the end of the quarter. Don Morgan's Brigade Capital also made a $4.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Mike Vranos's Ellington, David Costen Haley's HBK Investments, and David Costen Haley's HBK Investments.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Noble Corporation plc (NYSE:NE) but similarly valued. We will take a look at Monotype Imaging Holdings Inc. (NASDAQ:TYPE), Federal Agricultural Mortgage Corp. (NYSE:AGM), Twist Bioscience Corporation (NASDAQ:TWST), and X Financial (NYSE:XYF). This group of stocks' market values are similar to NE's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TYPE,17,176721,-1 AGM,9,20050,2 TWST,4,20101,4 XYF,2,3230,-2 Average,8,55026,0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $100 million in NE's case. Monotype Imaging Holdings Inc. (NASDAQ:TYPE) is the most popular stock in this table. On the other hand X Financial (NYSE:XYF) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Noble Corporation plc (NYSE:NE) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately NE wasn't nearly as popular as these 15 stock and hedge funds that were betting on NE were disappointed as the stock returned 13.4% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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

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