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Were Hedge Funds Right About Flocking Into PDL BioPharma Inc. (PDLI) ?

Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by more than 6 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of PDL BioPharma Inc. (NASDAQ:PDLI).

PDL BioPharma Inc. (NASDAQ:PDLI) shareholders have witnessed an increase in enthusiasm from smart money lately. Our calculations also showed that PDLI isn’t among the 30 most popular stocks among hedge funds.

To most investors, hedge funds are assumed to be worthless, outdated investment tools of the past. While there are more than 8000 funds trading at the moment, We choose to focus on the leaders of this club, around 750 funds. It is estimated that this group of investors shepherd most of the smart money’s total capital, and by following their inimitable investments, Insider Monkey has determined various investment strategies that have historically outrun the market. Insider Monkey’s flagship hedge fund strategy defeated the S&P 500 index by around 5 percentage points per year since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.

Bruce Kovner, Caxton Associates LP

Let’s view the key hedge fund action encompassing PDL BioPharma Inc. (NASDAQ:PDLI).

How have hedgies been trading PDL BioPharma Inc. (NASDAQ:PDLI)?

Heading into the second quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the fourth quarter of 2018. On the other hand, there were a total of 11 hedge funds with a bullish position in PDLI a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

PDLI_june2019

More specifically, Renaissance Technologies was the largest shareholder of PDL BioPharma Inc. (NASDAQ:PDLI), with a stake worth $35.8 million reported as of the end of March. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $9.6 million. Citadel Investment Group, AQR Capital Management, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.

As industrywide interest jumped, key money managers have been driving this bullishness. Winton Capital Management, managed by David Harding, established the most valuable position in PDL BioPharma Inc. (NASDAQ:PDLI). Winton Capital Management had $5 million invested in the company at the end of the quarter. Bruce Kovner’s Caxton Associates LP also made a $0.8 million investment in the stock during the quarter. The other funds with brand new PDLI positions are Jeffrey Talpins’s Element Capital Management and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s now take a look at hedge fund activity in other stocks similar to PDL BioPharma Inc. (NASDAQ:PDLI). We will take a look at Five Prime Therapeutics Inc (NASDAQ:FPRX), Arrow Financial Corporation (NASDAQ:AROW), Krystal Biotech, Inc. (NASDAQ:KRYS), and Axsome Therapeutics, Inc. (NASDAQ:AXSM). This group of stocks’ market values resemble PDLI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FPRX 15 126296 0
AROW 2 11697 -1
KRYS 16 113063 4
AXSM 14 92771 8
Average 11.75 85957 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $86 million. That figure was $83 million in PDLI’s case. Krystal Biotech, Inc. (NASDAQ:KRYS) is the most popular stock in this table. On the other hand Arrow Financial Corporation (NASDAQ:AROW) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks PDL BioPharma Inc. (NASDAQ:PDLI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 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 -20.7% during the same period 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 13 of these stocks already outperformed the market in Q2.

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

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