We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. That’s a big deal.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is InterDigital, Inc. (NASDAQ:IDCC) the right investment to pursue these days? Investors who are in the know are getting more optimistic. The number of bullish hedge fund positions advanced by 7 in recent months. Our calculations also showed that IDCC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Joel Greenblatt of Gotham Asset Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a gander at the key hedge fund action encompassing InterDigital, Inc. (NASDAQ:IDCC).
Hedge fund activity in InterDigital, Inc. (NASDAQ:IDCC)
At Q3’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 44% from the second quarter of 2019. On the other hand, there were a total of 18 hedge funds with a bullish position in IDCC a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Renaissance Technologies holds the largest position in InterDigital, Inc. (NASDAQ:IDCC). Renaissance Technologies has a $64 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by D E Shaw, led by David E. Shaw, holding a $62.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other peers with similar optimism include Spencer M. Waxman’s Shannon River Fund Management, Israel Englander’s Millennium Management and Robert Rodriguez and Steven Romick’s First Pacific Advisors. In terms of the portfolio weights assigned to each position Shannon River Fund Management allocated the biggest weight to InterDigital, Inc. (NASDAQ:IDCC), around 6.1% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, earmarking 0.18 percent of its 13F equity portfolio to IDCC.
Now, specific money managers were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, initiated the most valuable position in InterDigital, Inc. (NASDAQ:IDCC). Citadel Investment Group had $3.2 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also made a $1.5 million investment in the stock during the quarter. The other funds with new positions in the stock are David E. Shaw’s D E Shaw, Matthew Hulsizer’s PEAK6 Capital Management, and Joel Greenblatt’s Gotham Asset Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as InterDigital, Inc. (NASDAQ:IDCC) but similarly valued. These stocks are Bank of N.T. Butterfield & Son Limited (The) (NYSE:NTB), Moelis & Company (NYSE:MC), Matson, Inc. (NYSE:MATX), and Revolve Group, Inc. (NYSE:RVLV). This group of stocks’ market values are closest to IDCC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NTB | 15 | 114742 | 2 |
| MC | 16 | 63550 | 3 |
| MATX | 10 | 5024 | 2 |
| RVLV | 14 | 49758 | -1 |
| Average | 13.75 | 58269 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $224 million in IDCC’s case. Moelis & Company (NYSE:MC) is the most popular stock in this table. On the other hand Matson, Inc. (NYSE:MATX) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks InterDigital, Inc. (NASDAQ:IDCC) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on IDCC, though not to the same extent, as the stock returned 9% during the fourth quarter (through the end of November) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
