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Is Iridium Communications Inc. (IRDM) Going to Burn These Hedge Funds?

Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 8.7% through October 26th. Forty percent of the S&P 500 constituents were down more than 10%. The average return of a randomly picked stock in the index is -9.5%. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 25 most popular S&P 500 stocks among hedge funds had an average loss of 8.8%. In this article, we will take a look at what hedge funds think about Iridium Communications Inc. (NASDAQ:IRDM).

Is Iridium Communications Inc. (NASDAQ:IRDM) a buy, sell, or hold? Money managers are in an optimistic mood. The number of long hedge fund bets inched up by 1 lately. Our calculations also showed that IRDM isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

GAMCO Investors, Mario Gabelli

Let’s take a peek at the latest hedge fund action encompassing Iridium Communications Inc. (NASDAQ:IRDM).

Hedge fund activity in Iridium Communications Inc. (NASDAQ:IRDM)

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in IRDM heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

IRDM_dec2018

Among these funds, Renaissance Technologies held the most valuable stake in Iridium Communications Inc. (NASDAQ:IRDM), which was worth $39.1 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $20.6 million worth of shares. Moreover, D E Shaw, GAMCO Investors, and Brahman Capital were also bullish on Iridium Communications Inc. (NASDAQ:IRDM), allocating a large percentage of their portfolios to this stock.

As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Brahman Capital, managed by Mitch Kuflik and Rob Sobel, established the largest position in Iridium Communications Inc. (NASDAQ:IRDM). Brahman Capital had $10.3 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also initiated a $2 million position during the quarter. The only other fund with a brand new IRDM position is Frederick DiSanto’s Ancora Advisors.

Let’s check out hedge fund activity in other stocks similar to Iridium Communications Inc. (NASDAQ:IRDM). These stocks are LifePoint Health, Inc. (NASDAQ:LPNT), Select Medical Holdings Corporation (NYSE:SEM), Zuora, Inc. (NYSE:ZUO), and SeaDrill Limited (NYSE:SDRL). All of these stocks’ market caps resemble IRDM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LPNT 20 232786 4
SEM 19 196093 -1
ZUO 15 94438 0
SDRL 24 837744 20
Average 19.5 340265 5.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $340 million. That figure was $114 million in IRDM’s case. SeaDrill Limited (NYSE:SDRL) is the most popular stock in this table. On the other hand Zuora, Inc. (NYSE:ZUO) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Iridium Communications Inc. (NASDAQ:IRDM) is even less popular than ZUO. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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

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