Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s analyze whether Iridium Communications Inc. (NASDAQ:IRDM) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Iridium Communications Inc. (NASDAQ:IRDM) investors should pay attention to an increase in hedge fund interest recently. Our calculations also showed that IRDM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
If you’d ask most market participants, hedge funds are perceived as worthless, outdated investment tools of years past. While there are over 8000 funds trading today, We look at the elite of this group, about 850 funds. These hedge fund managers have their hands on most of the hedge fund industry’s total capital, and by shadowing their top investments, Insider Monkey has revealed many investment strategies that have historically outperformed Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Sahm Adrangi of Kerrisdale Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the latest hedge fund action regarding Iridium Communications Inc. (NASDAQ:IRDM).
What have hedge funds been doing with Iridium Communications Inc. (NASDAQ:IRDM)?
Heading into the first quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in IRDM a year ago. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
The largest stake in Iridium Communications Inc. (NASDAQ:IRDM) was held by Select Equity Group, which reported holding $79.9 million worth of stock at the end of September. It was followed by Silver Heights Capital Management with a $61.5 million position. Other investors bullish on the company included Brahman Capital, Renaissance Technologies, and Kerrisdale Capital. In terms of the portfolio weights assigned to each position Silver Heights Capital Management allocated the biggest weight to Iridium Communications Inc. (NASDAQ:IRDM), around 31.55% of its 13F portfolio. Kerrisdale Capital is also relatively very bullish on the stock, earmarking 5.53 percent of its 13F equity portfolio to IRDM.
As one would reasonably expect, some big names were leading the bulls’ herd. Invenomic Capital Management, managed by Ali Motamed, initiated the biggest position in Iridium Communications Inc. (NASDAQ:IRDM). Invenomic Capital Management had $3.5 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also made a $2.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management, Karim Abbadi and Edward McBride’s Centiva Capital, and John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Iridium Communications Inc. (NASDAQ:IRDM) but similarly valued. We will take a look at Valmont Industries, Inc. (NYSE:VMI), Alkermes Plc (NASDAQ:ALKS), Avista Corp (NYSE:AVA), and Houlihan Lokey Inc (NYSE:HLI). This group of stocks’ market values are similar to IRDM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VMI | 24 | 315469 | -4 |
| ALKS | 33 | 568267 | 7 |
| AVA | 15 | 149256 | -2 |
| HLI | 10 | 128406 | -7 |
| Average | 20.5 | 290350 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $290 million. That figure was $286 million in IRDM’s case. Alkermes Plc (NASDAQ:ALKS) is the most popular stock in this table. On the other hand Houlihan Lokey Inc (NYSE:HLI) is the least popular one with only 10 bullish hedge fund positions. Iridium Communications Inc. (NASDAQ:IRDM) is not the least popular stock in this group but hedge fund interest is still below average. 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 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on IRDM as the stock returned -16.2% during the same time period and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
