Should I Buy Precision Drilling Corp (PDS)?

Is Precision Drilling Corp (NYSE:PDS) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is Precision Drilling Corp (NYSE:PDS) the right investment to pursue these days? Prominent investors were getting more optimistic. The number of long hedge fund positions went up by 2 lately. Precision Drilling Corp (NYSE:PDS) was in 8 hedge funds’ portfolios at the end of September. The all time high for this statistics is 16. Our calculations also showed that PDS 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). There were 6 hedge funds in our database with PDS positions at the end of the second quarter.

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

In the financial world there are plenty of metrics stock market investors have at their disposal to analyze stocks. A couple of the most useful metrics are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the top hedge fund managers can trounce their index-focused peers by a healthy margin (see the details here).

Michael Hintze CQS Capital

Michael Hintze of CQS Cayman LP

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. With all of this in mind we’re going to take a peek at the key hedge fund action surrounding Precision Drilling Corp (NYSE:PDS).

How have hedgies been trading Precision Drilling Corp (NYSE:PDS)?

At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PDS over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Mountain Lake Investment Management was the largest shareholder of Precision Drilling Corp (NYSE:PDS), with a stake worth $3.7 million reported as of the end of September. Trailing Mountain Lake Investment Management was Scion Asset Management, which amassed a stake valued at $2.9 million. Arrowstreet Capital, Two Sigma Advisors, and Encompass Capital Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Mountain Lake Investment Management allocated the biggest weight to Precision Drilling Corp (NYSE:PDS), around 2.54% of its 13F portfolio. Scion Asset Management is also relatively very bullish on the stock, setting aside 0.87 percent of its 13F equity portfolio to PDS.

With a general bullishness amongst the heavyweights, specific money managers have jumped into Precision Drilling Corp (NYSE:PDS) headfirst. Encompass Capital Advisors, managed by Todd J. Kantor, created the most outsized position in Precision Drilling Corp (NYSE:PDS). Encompass Capital Advisors had $0.2 million invested in the company at the end of the quarter. Michael Hintze’s CQS Cayman LP also initiated a $0.1 million position during the quarter.

Let’s go over hedge fund activity in other stocks similar to Precision Drilling Corp (NYSE:PDS). We will take a look at Carter Bankshares, Inc. (NASDAQ:CARE), Scorpio Bulkers Inc (NYSE:SALT), TD Holdings, Inc. (NASDAQ:GLG), PowerFleet, Inc. (NASDAQ:PWFL), Select Interior Concepts, Inc. (NASDAQ:SIC), Atlantic Power Corp (NYSE:AT), and IDT Corporation (NYSE:IDT). This group of stocks’ market values match PDS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CARE 11 6673 0
SALT 2 2433 -7
GLG 2 225 0
PWFL 9 39125 -2
SIC 17 30218 1
AT 12 11716 -1
IDT 7 20910 1
Average 8.6 15900 -1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.6 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $9 million in PDS’s case. Select Interior Concepts, Inc. (NASDAQ:SIC) is the most popular stock in this table. On the other hand Scorpio Bulkers Inc (NYSE:SALT) is the least popular one with only 2 bullish hedge fund positions. Precision Drilling Corp (NYSE:PDS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PDS is 42. 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 PDS as the stock returned 62.7% 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.