Ion Geophysical Corp (IO): Are Hedge Funds Right About This Stock?

Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. Between November 1, 2014 and October 30 of this year, less than 49% of the stocks in the S&P 500 beat the market. However, hedge funds’ top 30 stock picks from the index had a much higher success rate than this, at 63%. The returns from these 30 stocks also easily bested the broader market, at 9.5% compared to 5.2%, despite there being a few duds in there like Micron and Anadarko (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.

Hedge fund interest in Ion Geophysical Corp (NYSE:IO) shares was flat at the end of last quarter. This is usually a negative indicator, especially considering a drop of 63.55% in the stock value of Ion Geophysical Corp (NYSE:IO). We will discuss more about the hedge funds that held positions in the company, at the end of the previous quarter.

The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article, we will examine companies such as Global Power Equipment Group Inc (NYSE:GLPW), S&W Seed Company (NASDAQ:SANW), and Ocera Therapeutics Inc (NASDAQ:OCRX) to gather more data points.

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Today, there are numerous signals stock traders have at their disposal to analyze publicly traded companies. Two of the less utilized signals are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the best money managers can outperform the broader indices by a significant amount (see the details here).

With all of this in mind, we’re going to take a look at the latest action regarding Ion Geophysical Corp (NYSE:IO).

How are hedge funds trading Ion Geophysical Corp (NYSE:IO)?

At the end of September, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from one quarter earlier. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies holds the largest position in Ion Geophysical Corp (NYSE:IO). Renaissance Technologies has a $1 million position in the stock, comprising less than 0.1% of its 13F portfolio. The second most bullish fund manager is Robert B. Gillam of McKinley Capital Management, with a $0.5 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions encompass Chuck Royce’s Royce & Associates, Cliff Asness’ AQR Capital Management, and Ken Griffin’s Citadel Investment Group.

Judging by the fact that Ion Geophysical Corp (NYSE:IO) has witnessed a declination in interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few money managers that elected to cut their full holdings by the end of the third quarter. At the top of the heap, Matthew Tewksbury’s Stevens Capital Management said goodbye to the largest stake of the 700 funds watched by Insider Monkey, valued at close to $0.1 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also dropped its stock, about $45,000 worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Ion Geophysical Corp (NYSE:IO) but similarly valued. We will take a look at Global Power Equipment Group Inc (NASDAQ:GLPW), S&W Seed Company (NASDAQ:SANW), Ocera Therapeutics Inc (NASDAQ:OCRX), and AXT Inc (NASDAQ:AXTI). All of these stocks’ market caps are closest to Ion Geophysical Corp (NYSE:IO)’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GLPW 14 21542 -1
SANW 5 8106 -1
OCRX 9 15385 -1
AXTI 4 9351 0

As you can see, these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $2 million in Ion Geophysical Corp (NYSE:IO)’s case. Global Power Equipment Group Inc (NASDAQ:GLPW) is the most popular stock in this table. On the other hand, AXT Inc (NASDAQ:AXTI) is the least popular one with only 4 bullish hedge fund positions. Ion Geophysical Corp (NYSE:IO) 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, Global Power Equipment Group Inc (NASDAQ:GLPW) might be a better candidate to consider a long position.