Is TDW A Good Stock To Buy Now?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Tidewater Inc. (NYSE:TDW) to find out whether there were any major changes in hedge funds’ views.

Is TDW a good stock to buy now? Hedge fund interest in Tidewater Inc. (NYSE:TDW) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that TDW 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). At the end of this article we will also compare TDW to other stocks including Pluristem Therapeutics Inc. (NASDAQ:PSTI), Leju Holdings Ltd (NYSE:LEJU), and Cresud Sociedad Anonima Comercial, Inmobiliaria, Financiera y Agropecuaria (NASDAQ:CRESY) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are dozens of signals stock traders have at their disposal to assess their stock investments. Two of the less known signals are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the top fund managers can outclass the market by a significant margin (see the details here).

Martin Whitman Third Avenue Management Marty Whitman

Martin Whitman of Third Avenue Management

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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 analyze the latest hedge fund action encompassing Tidewater Inc. (NYSE:TDW).

How have hedgies been trading Tidewater Inc. (NYSE:TDW)?

At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in TDW a year ago. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Third Avenue Management, managed by Martin Whitman, holds the most valuable position in Tidewater Inc. (NYSE:TDW). Third Avenue Management has a $19.4 million position in the stock, comprising 2.7% of its 13F portfolio. Sitting at the No. 2 spot is Amit Wadhwaney of Moerus Capital Management, with a $17.5 million position; the fund has 8.5% of its 13F portfolio invested in the stock. Other professional money managers that are bullish consist of Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Douglas Dethy’s DC Capital Partners. In terms of the portfolio weights assigned to each position Moerus Capital Management allocated the biggest weight to Tidewater Inc. (NYSE:TDW), around 8.53% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, setting aside 2.69 percent of its 13F equity portfolio to TDW.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Prelude Capital (previously Springbok Capital)).

Let’s now review hedge fund activity in other stocks similar to Tidewater Inc. (NYSE:TDW). We will take a look at Pluristem Therapeutics Inc. (NASDAQ:PSTI), Leju Holdings Ltd (NYSE:LEJU), Cresud Sociedad Anonima Comercial, Inmobiliaria, Financiera y Agropecuaria (NASDAQ:CRESY), Oil-Dri Corporation of America (NYSE:ODC), Hamilton Beach Brands Holding Company (NYSE:HBB), Verso Corporation (NYSE:VRS), and Selecta Biosciences, Inc. (NASDAQ:SELB). This group of stocks’ market values are closest to TDW’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PSTI 6 2208 2
LEJU 2 2788 -1
CRESY 4 6834 -3
ODC 4 32322 -1
HBB 8 5936 1
VRS 15 50832 0
SELB 18 63282 -1
Average 8.1 23457 -0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.1 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $42 million in TDW’s case. Selecta Biosciences, Inc. (NASDAQ:SELB) is the most popular stock in this table. On the other hand Leju Holdings Ltd (NYSE:LEJU) is the least popular one with only 2 bullish hedge fund positions. Tidewater Inc. (NYSE:TDW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TDW is 32.3. 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. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on TDW as the stock returned 42.9% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.

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