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Hedge Funds Never Been Less Bullish On Precision Drilling Corp (PDS)

In this article you are going to find out whether hedge funds think Precision Drilling Corp (NYSE:PDS) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Precision Drilling Corp (NYSE:PDS) undervalued? The best stock pickers are getting less bullish. The number of long hedge fund positions were cut by 5 recently. Our calculations also showed that PDS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most investors, hedge funds are viewed as underperforming, old investment vehicles of years past. While there are more than 8000 funds with their doors open today, Our researchers hone in on the moguls of this group, approximately 850 funds. It is estimated that this group of investors shepherd the lion’s share of the smart money’s total capital, and by keeping track of their best stock picks, Insider Monkey has determined several investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a peek at the key hedge fund action regarding Precision Drilling Corp (NYSE:PDS).

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

At Q1’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -45% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PDS over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is PDS A Good Stock To Buy?

More specifically, Mountain Lake Investment Management was the largest shareholder of Precision Drilling Corp (NYSE:PDS), with a stake worth $1.8 million reported as of the end of September. Trailing Mountain Lake Investment Management was Two Sigma Advisors, which amassed a stake valued at $0.5 million. Arrowstreet Capital, Renaissance Technologies, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Mountain Lake Investment Management allocated the biggest weight to Precision Drilling Corp (NYSE:PDS), around 1.73% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, designating 0.0021 percent of its 13F equity portfolio to PDS.

Since Precision Drilling Corp (NYSE:PDS) has experienced declining sentiment from hedge fund managers, logic holds that there exists a select few fund managers that elected to cut their entire stakes by the end of the first quarter. It’s worth mentioning that Todd J. Kantor’s Encompass Capital Advisors dumped the biggest investment of the 750 funds monitored by Insider Monkey, comprising an estimated $6.9 million in stock. Vince Maddi and Shawn Brennan’s fund, SIR Capital Management, also said goodbye to its stock, about $1.3 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 5 funds by the end of the first quarter.

Let’s check out hedge fund activity in other stocks similar to Precision Drilling Corp (NYSE:PDS). These stocks are Evolution Petroleum Corporation (NYSE:EPM), DIRTT Environmental Solutions Ltd. (NASDAQ:DRTT), Aravive, Inc. (NASDAQ:ARAV), and A-Mark Precious Metals, Inc. (NASDAQ:AMRK). This group of stocks’ market valuations are closest to PDS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EPM 9 8240 -2
DRTT 10 15572 -2
ARAV 6 10926 -3
AMRK 4 1476 1
Average 7.25 9054 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $3 million in PDS’s case. DIRTT Environmental Solutions Ltd. (NASDAQ:DRTT) is the most popular stock in this table. On the other hand A-Mark Precious Metals, Inc. (NASDAQ:AMRK) is the least popular one with only 4 bullish hedge fund positions. Precision Drilling Corp (NYSE:PDS) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on PDS as the stock returned 175% during the second quarter and outperformed the market by an even larger margin.

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