Do Hedge Funds Love Tidewater Inc. (TDW)?

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Tidewater Inc. (NYSE:TDW).

Tidewater Inc. (NYSE:TDW) has experienced an increase in enthusiasm from smart money in recent months. At the end of this article we will also compare TDW to other stocks including ProNAi Therapeutics Inc (NASDAQ:DNAI), Quanex Building Products Corporation (NYSE:NX), and Tile Shop Hldgs, Inc. (NASDAQ:TTS) to get a better sense of its popularity.

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If you’d ask most investors, hedge funds are perceived as slow, outdated investment vehicles of the past. While there are more than 8000 funds in operation today, Our researchers look at the leaders of this group, around 700 funds. These hedge fund managers shepherd bulk of all hedge funds’ total asset base, and by keeping an eye on their top picks, Insider Monkey has determined a few investment strategies that have historically outperformed the broader indices. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Keeping this in mind, let’s check out the new action encompassing Tidewater Inc. (NYSE:TDW).

What have hedge funds been doing with Tidewater Inc. (NYSE:TDW)?

Heading into Q4, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from the previous quarter. With the smart money’s capital changing hands, there exist a few key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, East Side Capital (RR Partners), managed by Steven Richman, holds the number one position in Tidewater Inc. (NYSE:TDW). East Side Capital (RR Partners) has a $21.4 million position in the stock, comprising 0.9% of its 13F portfolio. Sitting at the No. 2 spot is Royce & Associates, led by Chuck Royce, holding an $12.1 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions contain Eric Chen’s Antipodean Advisors, Robert Vollero and Gentry T. Beach’s Vollero Beach Capital Partners and Jim Simons’s Renaissance Technologies.

Now, key hedge funds were breaking ground themselves. Renaissance Technologies, managed by Jim Simons, established the biggest position in Tidewater Inc. (NYSE:TDW). Renaissance Technologies had $1.3 million invested in the company at the end of the quarter. Joseph Mathias’s Concourse Capital Management also made an $0.8 million investment in the stock during the quarter. The following funds were also among the new TDW investors: Joel Greenblatt’s Gotham Asset Management and Matthew Tewksbury’s Stevens Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to Tidewater Inc. (NYSE:TDW). We will take a look at ProNAi Therapeutics Inc (NASDAQ:DNAI), Quanex Building Products Corporation (NYSE:NX), Tile Shop Hldgs, Inc. (NASDAQ:TTS), and Walter Investment Management Corp (NYSE:WAC). All of these stocks’ market caps resemble TDW’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DNAI 12 120298 12
NX 21 95654 3
TTS 20 109809 10
WAC 5 353896 -1

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $170 million. That figure was $45 million in TDW’s case. Quanex Building Products Corporation (NYSE:NX) is the most popular stock in this table. On the other hand, Walter Investment Management Corp (NYSE:WAC) is the least popular one with only 5 bullish hedge fund positions. Even though Tidewater Inc. (NYSE:TDW) is not the most popular stock in this group, it has succeeded to attract investors’ attention above average. This is a slightly positive signal, but we’d rather focus on analyzing stocks that hedge funds are collectively the most fond of. In this regard NX might be a better candidate to consider a long position.