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Hedge Funds Have Never Been This Bullish On pdvWireless Inc (PDVW)

“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on pdvWireless Inc (NASDAQ:PDVW) in order to identify whether reputable and successful top money managers continue to believe in its potential.

pdvWireless Inc (NASDAQ:PDVW) investors should pay attention to an increase in activity from the world’s largest hedge funds lately. PDVW was in 13 hedge funds’ portfolios at the end of the first quarter of 2019. There were 12 hedge funds in our database with PDVW positions at the end of the previous quarter. Our calculations also showed that PDVW isn’t among the 30 most popular stocks among hedge funds.

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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeffrey Altman Owl Creek

Let’s take a look at the fresh hedge fund action surrounding pdvWireless Inc (NASDAQ:PDVW).

What have hedge funds been doing with pdvWireless Inc (NASDAQ:PDVW)?

At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PDVW over the last 15 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

PDVW_jun2019

The largest stake in pdvWireless Inc (NASDAQ:PDVW) was held by Cerberus Capital Management, which reported holding $123.3 million worth of stock at the end of March. It was followed by Owl Creek Asset Management with a $93.1 million position. Other investors bullish on the company included Lomas Capital Management, QVT Financial, and Millennium Management.

Now, key money managers were leading the bulls’ herd. Atika Capital, managed by Brad Farber, assembled the largest position in pdvWireless Inc (NASDAQ:PDVW). Atika Capital had $1.3 million invested in the company at the end of the quarter. Jody LaNasa’s Serengeti Asset Management also initiated a $1.1 million position during the quarter. The other funds with new positions in the stock are Ravee Mehta’s Nishkama Capital and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as pdvWireless Inc (NASDAQ:PDVW) but similarly valued. We will take a look at McEwen Mining Inc (NYSE:MUX), U.S. Well Services, Inc. (NASDAQ:USWS), First Financial Corp (NASDAQ:THFF), and Natural Resource Partners LP (NYSE:NRP). This group of stocks’ market caps are closest to PDVW’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MUX 5 4852 0
USWS 13 42384 -1
THFF 7 12875 2
NRP 5 18109 1
Average 7.5 19555 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $253 million in PDVW’s case. U.S. Well Services, Inc. (NASDAQ:USWS) is the most popular stock in this table. On the other hand McEwen Mining Inc (NYSE:MUX) is the least popular one with only 5 bullish hedge fund positions. pdvWireless Inc (NASDAQ:PDVW) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on PDVW as the stock returned 31.9% during the same period 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.

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