We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Iridium Communications Inc (NASDAQ:IRDM), and what that likely means for the prospects of the company and its stock.
Hedge fund interest in Iridium Communications Inc (NASDAQ:IRDM) shares was flat during the third quarter. 11 hedge funds that we track owned the stock on September 30, same as on June 30. This is usually a negative indicator. At the end of this article we will also compare IRDM to other stocks including Cresud S.A.C.I.F. y A. (ADR) (NASDAQ:CRESY), LGI Homes Inc (NASDAQ:LGIH), and Orthofix International NV (NASDAQ:OFIX) to get a better sense of its popularity.
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
What have hedge funds been doing with Iridium Communications Inc (NASDAQ:IRDM)?
Heading into the fourth quarter of 2016, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards IRDM over the last 5 quarters, which has remained fairly stable. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Chuck Royce’s Royce & Associates has the most valuable position in Iridium Communications Inc (NASDAQ:IRDM), worth close to $6.5 million. Sitting at the No. 2 spot is Citadel Investment Group, led by Ken Griffin, holding a $5.1 million position. Other peers that hold long positions consist of David M. Knott’s Dorset Management and Renaissance Technologies, one of the largest hedge funds in the world. We should note that Dorset Management is 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.