When trying to make money in the stock market, knowledge is power, and often larger institutional funds have a grasp of the most pertinent data and information to make trades from. One way to search for this information is by keeping an eye on the activity of these investing institutions which include investment banks, classical hedge funds and activist hedge funds. That last one is particularly interesting, as activist hedge funds are known for their reactionary and “event-driven” investing strategies in order to profit from mismanaged or underperforming companies.
As part of this strategy, these funds will often purchase shares in a company until they own a controlling stake to propose and make changes to the company’s management or business strategy to improve its financial performance and thereby its share value. Yet, when an activist hedge fund begins selling its shares in a company, it can often signal one of two things. Either the fund has given up on its attempt to take over the company, or it has derived all the value it can, meaning the share value might fall soon. As such, here are three of the recently most sold stocks by activist hedge funds to keep an eye on.
Seadrill (SDRL)
On June 13, 2024, major activist hedge fund Elliot Investment Management sold 840,422 shares of offshore drill ships and semi-submersible platforms giant Seadrill (NYSE:SDRL). This marked a 17.65% decrease in ownership for the fund and has continued the firm’s selloff trend of the stock which started back in April 2023.
What this means for investors is that over the last year, Elliott Investment Management has been quietly offloading its position in Seadrill, which has seen its share growth rise around 18% in the same timeframe. Thus, it’s likely Elliott Investment Management is slowly taking profits from a once powerful position to generate returns for its investors.
For retail investors, this information is useful in a few ways. It can either be a signal to current holders to begin gradually taking profits as the company’s price reaches a peak, or it can be interpreted as a signal to interested buyers that the stock’s current price cycle favors selling over buying, despite a 13.63x price-to-earnings ratio and strong first-quarter performance.
GoDaddy (GDDY)
Another company facing a selloff trend from its activist hedge fund investors, GoDaddy (NYSE:GDDY), has soared over the last year as activist fund Starboard Value takes profits. Whether this generous year of success is due to Starboard Value’s management contributions or GoDaddy’s organic growth is hard to say, but the company’s reported 748.84% increase in net income for Q1 2024 has kept the momentum going.
In this case, if an investor is already happily holding shares of GDDY, Starboard Value’s gradual selloff is indicative of a profit-taking strategy and should be no cause for alarm. Moreover, the company’s second-quarter earnings report comes out on August 1, which could be a significant catalyst for yet another rally should the company increase its revenues and profits yet again.
As such, now could be a great time to get in on GDDY stock before another surge brings its price up and institutions take more profits.
Criteo (CRTO)
Following the trend of a gradual selloff as stock value grows, Petrus Advisers has been selling its stake in advertising tech company Criteo (NASDAQ:CRTO) since May with its most recent move occurring on July 11, 2024. This comes after a year-long period of generous investing in the company, which started with the purchase of 2.9 million shares in December 2023 and peaked at 5.8 million shares in May 2024. Now seemingly satisfied with the growth of the company’s share value, Petrus Advisers has gone all in on selling its once 30% ownership of Criteo.
Amidst these activities, Criteo’s share value has grown over 36% as all of its key financial metrics have exhibited positive growth. With its second-quarter earnings report due on August 1, investors may want to consider a short-term buying position to ride the wave of growth Petrus Advisers is profiting from.
On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.
