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Pendrell Corporation – Class A (PCO): Hedge Funds and Insiders Are Bearish, What Should You Do?

Pendrell Corporation – Class A (NASDAQ:PCO) was in 8 hedge funds’ portfolio at the end of the first quarter of 2013. PCO investors should pay attention to a decrease in support from the world’s most elite money managers lately. There were 10 hedge funds in our database with PCO positions at the end of the previous quarter.

In the eyes of most shareholders, hedge funds are viewed as worthless, old financial vehicles of the past. While there are over 8000 funds trading at the moment, we at Insider Monkey choose to focus on the leaders of this group, around 450 funds. It is widely believed that this group has its hands on the majority of the hedge fund industry’s total asset base, and by monitoring their top investments, we have uncovered a few investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Equally as integral, positive insider trading sentiment is another way to break down the financial markets. Obviously, there are lots of motivations for an insider to sell shares of his or her company, but just one, very obvious reason why they would behave bullishly. Various academic studies have demonstrated the market-beating potential of this tactic if “monkeys” understand where to look (learn more here).

Consequently, we’re going to take a look at the key action encompassing Pendrell Corporation – Class A (NASDAQ:PCO).

What have hedge funds been doing with Pendrell Corporation – Class A (NASDAQ:PCO)?

Heading into Q2, a total of 8 of the hedge funds we track were bullish in this stock, a change of -20% from the first quarter. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings substantially.

Pendrell Corporation - Class A (NASDAQ:PCO)When looking at the hedgies we track, James Dondero’s Highland Capital Management had the biggest position in Pendrell Corporation – Class A (NASDAQ:PCO), worth close to $75.7 million, accounting for 6.3% of its total 13F portfolio. Coming in second is Steelhead Partners, managed by Michael Johnston, which held a $9.8 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Remaining hedgies with similar optimism include Andrew Spokes’s Farallon Capital, John W. Rogers’s Ariel Investments and D. E. Shaw’s D E Shaw.

Seeing as Pendrell Corporation – Class A (NASDAQ:PCO) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there is a sect of funds that slashed their entire stakes at the end of the first quarter. At the top of the heap, John Kleinheinz’s Kleinheinz Capital Partners dumped the largest stake of the 450+ funds we watch, valued at close to $5.7 million in stock., and Ken Griffin of Citadel Investment Group was right behind this move, as the fund sold off about $0.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 2 funds at the end of the first quarter.

What have insiders been doing with Pendrell Corporation – Class A (NASDAQ:PCO)?

Insider buying is best served when the company in question has experienced transactions within the past half-year. Over the latest 180-day time frame, Pendrell Corporation – Class A (NASDAQ:PCO) has experienced zero unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Pendrell Corporation – Class A (NASDAQ:PCO). These stocks are NTELOS Holdings Corp. (NASDAQ:NTLS), USA Mobility Inc (NASDAQ:USMO), Leap Wireless International, Inc. (NASDAQ:LEAP), and UTStarcom Holdings Corp (NASDAQ:UTSI). This group of stocks are in the wireless communications industry and their market caps are similar to PCO’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
NTELOS Holdings Corp. (NASDAQ:NTLS) 5 2 0
USA Mobility Inc (NASDAQ:USMO) 10 1 1
Leap Wireless International, Inc. (NASDAQ:LEAP) 14 0 4
UTStarcom Holdings Corp (NASDAQ:UTSI) 8 0 0

With the returns exhibited by our research, retail investors should always monitor hedge fund and insider trading activity, and Pendrell Corporation – Class A (NASDAQ:PCO) is no exception.

Click here to learn why you should track hedge funds

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