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PDL BioPharma Inc. (PDLI) Is Burning These Hedge Funds

Is PDL BioPharma Inc. (NASDAQ:PDLI) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is PDL BioPharma Inc. (NASDAQ:PDLI) a worthy investment today? The smart money is becoming less hopeful. The number of long hedge fund bets dropped by 5 recently. Our calculations also showed that PDLI isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

AQR CAPITAL MANAGEMENT

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s review the new hedge fund action regarding PDL BioPharma Inc. (NASDAQ:PDLI).

What does smart money think about PDL BioPharma Inc. (NASDAQ:PDLI)?

At Q2’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -28% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PDLI over the last 16 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with PDLI Positions

The largest stake in PDL BioPharma Inc. (NASDAQ:PDLI) was held by Renaissance Technologies, which reported holding $28.3 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $9.4 million position. Other investors bullish on the company included D E Shaw, Arrowstreet Capital, and AQR Capital Management.

Seeing as PDL BioPharma Inc. (NASDAQ:PDLI) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there exists a select few hedge funds that slashed their positions entirely last quarter. At the top of the heap, Jeffrey Talpins’s Element Capital Management dropped the biggest investment of all the hedgies followed by Insider Monkey, worth about $0.4 million in stock, and Ronald Hua’s Qtron Investments was right behind this move, as the fund cut about $0.3 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 5 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as PDL BioPharma Inc. (NASDAQ:PDLI) but similarly valued. These stocks are MarineMax, Inc. (NYSE:HZO), Roadrunner Transportation Systems Inc (NYSE:RRTS), Inseego Corp. (NASDAQ:INSG), and MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT). This group of 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
HZO 7 7939 -4
RRTS 2 325001 -5
INSG 8 21906 -7
MCFT 17 91965 1
Average 8.5 111703 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $112 million. That figure was $67 million in PDLI’s case. MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT) is the most popular stock in this table. On the other hand Roadrunner Transportation Systems Inc (NYSE:RRTS) is the least popular one with only 2 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. 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 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 -31.2% during the third 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 many of these stocks already outperformed the market so far this year.

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

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