Should You Add InterDigital, Inc. (IDCC) to Your Portfolio?

The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at InterDigital, Inc. (NASDAQ:IDCC) from the perspective of those successful funds.

Is InterDigital, Inc. (NASDAQ:IDCC) a superb stock to buy now? It looks like the best stock pickers are getting more optimistic, as the number of long hedge fund bets that are revealed through the 13F filings went up by seven during the third quarter. At the end of September, 24 funds in our database held shares of IDCC. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Graham Holdings Co (NYSE:GHC), LaSalle Hotel Properties (NYSE:LHO), and Oceaneering International (NYSE:OII) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Keeping this in mind, we’re going to take a gander at the key action encompassing InterDigital, Inc. (NASDAQ:IDCC).

How have hedgies been trading InterDigital, Inc. (NASDAQ:IDCC)?

At the end of September, 24 hedge funds tracked by Insider Monkey were bullish on InterDigital, Inc. (NASDAQ:IDCC), up by 41% over the quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in IDCC at the beginning of this year. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC holds the number one position in InterDigital, Inc. (NASDAQ:IDCC). First Pacific Advisors LLC has a $54.2 million position in the stock, comprising 0.4% of its 13F portfolio. The second largest stake is held by Jim Simons’ Renaissance Technologies, which disclosed a $44.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions include D. E. Shaw’s D E Shaw, John Overdeck and David Siegel’s Two Sigma Advisors, and Amy Minella’s Cardinal Capital. We should note that none of these hedge funds are 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.

As aggregate interest increased, specific money managers were leading the bulls’ herd. Marshall Wace LLP, led by Paul Marshall and Ian Wace, created the biggest position in InterDigital, Inc. (NASDAQ:IDCC). Marshall Wace LLP had $13.9 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $8.6 million investment in the stock during the third quarter. The following funds were also among the new IDCC investors: Israel Englander’s Millennium Management, D. E. Shaw’s D E Shaw, and Neil Chriss’s Hutchin Hill Capital.

Let’s check out hedge fund activity in other stocks similar to InterDigital, Inc. (NASDAQ:IDCC). We will take a look at Graham Holdings Co (NYSE:GHC), LaSalle Hotel Properties (NYSE:LHO), Oceaneering International (NYSE:OII), and NetScout Systems, Inc. (NASDAQ:NTCT). This group of stocks’ market caps are similar to IDCC’s market cap.

As you can see these stocks had an average of 18 investors with bullish positions and the average amount invested in these stocks was $279 million, compared to $260 million in IDCC’s case. Oceaneering International (NYSE:OII) is the most popular stock in this table, while LaSalle Hotel Properties (NYSE:LHO) is the least popular one with only 13 investors holding shares. Compared to these stocks InterDigital, Inc. (NASDAQ:IDCC) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: none