You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Pendrell Corporation (NASDAQ:PCO) was in 8 hedge funds’ portfolios at the end of September. PCO investors should pay attention to a decrease in hedge fund sentiment recently. There were 9 hedge funds in our database with PCO holdings at the end of the previous quarter. At the end of this article we will also compare PCO to other stocks including FreightCar America, Inc. (NASDAQ:RAIL), Wi-LAN Inc – US listing (NASDAQ:WILN), and Ceragon Networks Ltd. (NASDAQ:CRNT) to get a better sense of its popularity.
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
With all of this in mind, we’re going to take a glance at the new action encompassing Pendrell Corporation (NASDAQ:PCO).
How have hedgies been trading Pendrell Corporation (NASDAQ:PCO)?
Heading into the fourth quarter of 2016, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 11% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in PCO at the beginning of this year. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, John W. Rogers’ Ariel Investments has the most valuable position in Pendrell Corporation (NASDAQ:PCO), worth close to $22.7 million, comprising 0.3% of its total 13F portfolio. On Ariel Investments’ heels is Highland Capital Management, led by James Dondero, which holds a $11.3 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism encompass Thomas Steyer’s Farallon Capital, Matthew Drapkin and Steven R. Becker’s Becker Drapkin Management and Michael Johnston’s Steelhead Partners. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Due to the fact that Pendrell Corporation (NASDAQ:PCO) has witnessed falling interest from hedge fund managers, we can see that there exists a select few hedge funds who sold off their positions entirely by the end of the third quarter. Interestingly, Millennium Management, one of the 10 largest hedge funds in the world, cashed in the biggest position of the “upper crust” of funds studied by Insider Monkey, comprising close to $1.2 million in stock. Ben Levine, Andrew Manuel and Stefan Renold’s fund, LMR Partners, also cut its stock, about $0.1 million worth.
Let’s check out hedge fund activity in other stocks similar to Pendrell Corporation (NASDAQ:PCO). These stocks are FreightCar America, Inc. (NASDAQ:RAIL), Wi-LAN Inc – US listing (NASDAQ:WILN), Ceragon Networks Ltd. (NASDAQ:CRNT), and Capstar Financial Holdings Inc (NASDAQ:CSTR). All of these stocks’ market caps are closest to PCO’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $44 million in PCO’s case. FreightCar America, Inc. (NASDAQ:RAIL) is the most popular stock in this table. On the other hand Wi-LAN Inc – US listing (NASDAQ:WILN) is the least popular one with only 3 bullish hedge fund positions. Pendrell Corporation – Class A (NASDAQ:PCO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard RAIL might be a better candidate to consider taking a long position in.