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Hedge Funds Souring On InterDigital, Inc. (IDCC)

In this article we will take a look at whether hedge funds think InterDigital, Inc. (NASDAQ:IDCC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

InterDigital, Inc. (NASDAQ:IDCC) shareholders have witnessed a decrease in support from the world’s most elite money managers recently. Our calculations also showed that IDCC 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Howard Marks OAKTREE CAPITAL MANAGEMENT

Howard Marks of Oaktree Capital Management

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 trades like this one. 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. Now let’s take a gander at the latest hedge fund action surrounding InterDigital, Inc. (NASDAQ:IDCC).

How have hedgies been trading InterDigital, Inc. (NASDAQ:IDCC)?

Heading into the second quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in IDCC a year ago. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Is IDCC A Good Stock To Buy?

Among these funds, Renaissance Technologies held the most valuable stake in InterDigital, Inc. (NASDAQ:IDCC), which was worth $71.4 million at the end of the third quarter. On the second spot was Shannon River Fund Management which amassed $54 million worth of shares. D E Shaw, Toronado Partners, and Rubric Capital Management 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 Toronado Partners allocated the biggest weight to InterDigital, Inc. (NASDAQ:IDCC), around 9.56% of its 13F portfolio. Shannon River Fund Management is also relatively very bullish on the stock, setting aside 9.13 percent of its 13F equity portfolio to IDCC.

Seeing as InterDigital, Inc. (NASDAQ:IDCC) has witnessed a decline in interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of funds that decided to sell off their entire stakes by the end of the first quarter. Interestingly, Michael Hintze’s CQS Cayman LP said goodbye to the biggest position of the 750 funds tracked by Insider Monkey, valued at about $20.1 million in stock. Xiuping Li’s fund, Opti Capital Management, also dropped its stock, about $11.8 million worth. These transactions are interesting, as total hedge fund interest dropped by 4 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to InterDigital, Inc. (NASDAQ:IDCC). We will take a look at The Goodyear Tire & Rubber Company (NASDAQ:GT), Embraer SA (NYSE:ERJ), Itau CorpBanca (NYSE:ITCB), and Zogenix, Inc. (NASDAQ:ZGNX). This group of stocks’ market values are similar to IDCC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GT 26 129699 -6
ERJ 16 188996 2
ITCB 1 1270 0
ZGNX 36 579292 3
Average 19.75 224814 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $225 million. That figure was $290 million in IDCC’s case. Zogenix, Inc. (NASDAQ:ZGNX) is the most popular stock in this table. On the other hand Itau CorpBanca (NYSE:ITCB) is the least popular one with only 1 bullish hedge fund positions. InterDigital, Inc. (NASDAQ:IDCC) is not the most popular stock in this group but hedge fund interest is still above 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 but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on IDCC as the stock returned 31.7% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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