Did Hedge Funds Drop The Ball On Precision Drilling Corp (PDS) ?

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Precision Drilling Corp (NYSE:PDS).

Precision Drilling Corp (NYSE:PDS) has seen a decrease in hedge fund interest in recent months. Our calculations also showed that pds isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ken Griffin

We’re going to take a gander at the new hedge fund action regarding Precision Drilling Corp (NYSE:PDS).

How are hedge funds trading Precision Drilling Corp (NYSE:PDS)?

Heading into the first quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards PDS over the last 14 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with PDS Positions

The largest stake in Precision Drilling Corp (NYSE:PDS) was held by Encompass Capital Advisors, which reported holding $11.5 million worth of stock at the end of December. It was followed by Mountain Lake Investment Management with a $10 million position. Other investors bullish on the company included Citadel Investment Group, Two Sigma Advisors, and Arrowstreet Capital.

Seeing as Precision Drilling Corp (NYSE:PDS) has experienced a decline in interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of money managers that decided to sell off their full holdings last quarter. Intriguingly, Jerome L. Simon’s Lonestar Capital Management said goodbye to the biggest stake of the 700 funds monitored by Insider Monkey, worth about $15.6 million in stock. John Brennan’s fund, Sirios Capital Management, also dumped its stock, about $4.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 1 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Precision Drilling Corp (NYSE:PDS). These stocks are Veracyte Inc (NASDAQ:VCYT), Hoegh LNG Partners LP (NYSE:HMLP), Luther Burbank Corporation (NASDAQ:LBC), and Foresight Energy LP (NYSE:FELP). This group of stocks’ market values resemble PDS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VCYT 17 73290 3
HMLP 7 21022 2
LBC 6 27473 1
FELP 3 771 0
Average 8.25 30639 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $30 million in PDS’s case. Veracyte Inc (NASDAQ:VCYT) is the most popular stock in this table. On the other hand Foresight Energy LP (NYSE:FELP) is the least popular one with only 3 bullish hedge fund positions. Precision Drilling Corp (NYSE:PDS) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on PDS as the stock returned 66.1% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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