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Is IDT Corporation (IDT) Going To Burn These Hedge Funds ?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 8 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in IDT Corporation (NYSE:IDT).

IDT Corporation (NYSE:IDT) was in 11 hedge funds’ portfolios at the end of the third quarter of 2019. IDT investors should be aware of a decrease in activity from the world’s largest hedge funds in recent months. There were 13 hedge funds in our database with IDT positions at the end of the previous quarter. Our calculations also showed that IDT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

According to most investors, hedge funds are seen as worthless, outdated financial vehicles of years past. While there are over 8000 funds trading at the moment, Our researchers hone in on the moguls of this group, approximately 750 funds. Most estimates calculate that this group of people control the majority of the smart money’s total asset base, and by observing their matchless stock picks, Insider Monkey has brought to light several investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

David Harding

David Harding of Winton Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a glance at the fresh hedge fund action regarding IDT Corporation (NYSE:IDT).

How are hedge funds trading IDT Corporation (NYSE:IDT)?

Heading into the fourth quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the previous quarter. By comparison, 13 hedge funds held shares or bullish call options in IDT a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the biggest position in IDT Corporation (NYSE:IDT), worth close to $19.4 million, comprising less than 0.1%% of its total 13F portfolio. On Renaissance Technologies’s heels is D E Shaw, managed by David E. Shaw, which holds a $9 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism encompass Kahn Brothers, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and David Harding’s Winton Capital Management. In terms of the portfolio weights assigned to each position Kahn Brothers allocated the biggest weight to IDT Corporation (NYSE:IDT), around 0.93% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to IDT.

Since IDT Corporation (NYSE:IDT) has faced a decline in interest from the smart money, we can see that there was a specific group of fund managers who were dropping their positions entirely last quarter. At the top of the heap, Israel Englander’s Millennium Management dropped the biggest position of all the hedgies monitored by Insider Monkey, valued at about $0.4 million in call options, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund dumped about $0.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 2 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to IDT Corporation (NYSE:IDT). We will take a look at Territorial Bancorp Inc (NASDAQ:TBNK), Advanced Emissions Solutions, Inc. (NASDAQ:ADES), Preformed Line Products Company (NASDAQ:PLPC), and Central Valley Community Bancorp (NASDAQ:CVCY). All of these stocks’ market caps are closest to IDT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TBNK 4 23620 0
ADES 8 42100 0
PLPC 5 30118 0
CVCY 3 16452 0
Average 5 28073 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $40 million in IDT’s case. Advanced Emissions Solutions, Inc. (NASDAQ:ADES) is the most popular stock in this table. On the other hand Central Valley Community Bancorp (NASDAQ:CVCY) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks IDT Corporation (NYSE:IDT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately IDT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on IDT were disappointed as the stock returned -32.3% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

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