Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to PDL BioPharma Inc. (NASDAQ:PDLI) changed recently.
Is PDLI a good stock to buy now? PDL BioPharma Inc. (NASDAQ:PDLI) has seen a decrease in support from the world’s most elite money managers lately. PDL BioPharma Inc. (NASDAQ:PDLI) was in 15 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 20. Our calculations also showed that PDLI isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to review the key hedge fund action surrounding PDL BioPharma Inc. (NASDAQ:PDLI).
Do Hedge Funds Think PDLI Is A Good Stock To Buy Now?
At third quarter’s end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PDLI over the last 21 quarters. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
The largest stake in PDL BioPharma Inc. (NASDAQ:PDLI) was held by Park West Asset Management, which reported holding $28.9 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $23.9 million position. Other investors bullish on the company included Silver Point Capital, Madison Avenue Partners, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Madison Avenue Partners allocated the biggest weight to PDL BioPharma Inc. (NASDAQ:PDLI), around 5.38% of its 13F portfolio. Silver Point Capital is also relatively very bullish on the stock, setting aside 2.47 percent of its 13F equity portfolio to PDLI.
Because PDL BioPharma Inc. (NASDAQ:PDLI) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of money managers that elected to cut their positions entirely heading into Q4. Intriguingly, Arnaud Ajdler’s Engine Capital cut the largest investment of the 750 funds watched by Insider Monkey, totaling close to $1 million in stock. Roger Ibbotson’s fund, Zebra Capital Management, also cut its stock, about $0.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as PDL BioPharma Inc. (NASDAQ:PDLI) but similarly valued. We will take a look at Interface, Inc. (NASDAQ:TILE), Dorchester Minerals LP (NASDAQ:DMLP), Chatham Lodging Trust (NYSE:CLDT), Village Super Market, Inc. (NASDAQ:VLGEA), Corporacion America Airports SA (NYSE:CAAP), Cellular Biomedicine Group, Inc. (NASDAQ:CBMG), and Superior Group of Companies, Inc. (NASDAQ:SGC). All of these stocks’ market caps are closest to PDLI’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.7 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $108 million in PDLI’s case. Interface, Inc. (NASDAQ:TILE) is the most popular stock in this table. On the other hand Corporacion America Airports SA (NYSE:CAAP) is the least popular one with only 4 bullish hedge fund positions. PDL BioPharma Inc. (NASDAQ:PDLI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PDLI is 68.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately PDLI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PDLI were disappointed as the stock returned -16.5% since the end of September (through 12/14) 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.