Hedge Funds Are Crazy About Iridium Communications Inc. (IRDM)

In this article we are going to use hedge fund sentiment as a tool and determine whether Iridium Communications Inc. (NASDAQ:IRDM) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is Iridium Communications Inc. (NASDAQ:IRDM) the right investment to pursue these days? Money managers were getting more bullish. The number of bullish hedge fund positions inched up by 4 in recent months. Iridium Communications Inc. (NASDAQ:IRDM) was in 22 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 20. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that IRDM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 18 hedge funds in our database with IRDM positions at the end of the fourth quarter.

Today there are a lot of methods market participants use to value publicly traded companies. Some of the less utilized methods are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the elite investment managers can outclass their index-focused peers by a solid amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Mario Gabelli of GAMCO Investors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s view the key hedge fund action surrounding Iridium Communications Inc. (NASDAQ:IRDM).

Do Hedge Funds Think IRDM Is A Good Stock To Buy Now?

At Q1’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in IRDM a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Catherine D. Wood’s ARK Investment Management has the number one position in Iridium Communications Inc. (NASDAQ:IRDM), worth close to $427.2 million, amounting to 0.8% of its total 13F portfolio. The second most bullish fund manager is Silver Heights Capital Management, led by Kevin Kuebler and Ming Lam, holding a $99.1 million position; 34.9% of its 13F portfolio is allocated to the company. Other peers that hold long positions contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Mario Gabelli’s GAMCO Investors and Noam Gottesman’s GLG Partners. In terms of the portfolio weights assigned to each position Silver Heights Capital Management allocated the biggest weight to Iridium Communications Inc. (NASDAQ:IRDM), around 34.93% of its 13F portfolio. ARK Investment Management is also relatively very bullish on the stock, designating 0.85 percent of its 13F equity portfolio to IRDM.

As one would reasonably expect, key money managers were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the biggest position in Iridium Communications Inc. (NASDAQ:IRDM). Arrowstreet Capital had $19.1 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $7.5 million investment in the stock during the quarter. The other funds with brand new IRDM positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, David Costen Haley’s HBK Investments, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Iridium Communications Inc. (NASDAQ:IRDM) but similarly valued. These stocks are Tenet Healthcare Corp (NYSE:THC), Evercore Inc. (NYSE:EVR), Nextera Energy Partners LP (NYSE:NEP), Tandem Diabetes Care Inc (NASDAQ:TNDM), Douglas Emmett, Inc. (NYSE:DEI), SolarWinds Corporation (NYSE:SWI), and Crane Co. (NYSE:CR). This group of stocks’ market valuations resemble IRDM’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
THC 39 1515145 5
EVR 31 365300 3
NEP 17 175587 -15
TNDM 25 204890 -1
DEI 14 337957 -7
SWI 22 2290541 -2
CR 17 277149 -7
Average 23.6 738081 -3.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.6 hedge funds with bullish positions and the average amount invested in these stocks was $738 million. That figure was $605 million in IRDM’s case. Tenet Healthcare Corp (NYSE:THC) is the most popular stock in this table. On the other hand Douglas Emmett, Inc. (NYSE:DEI) is the least popular one with only 14 bullish hedge fund positions. Iridium Communications Inc. (NASDAQ:IRDM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for IRDM is 55. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately IRDM wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); IRDM investors were disappointed as the stock returned -10.4% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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