Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.4% through the end of November and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is Precision Drilling Corporation (NYSE:PDS) a superb investment today? Money managers are buying. The number of long hedge fund bets went up by 4 in recent months. 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 below for Q2 rankings). PDS was in 12 hedge funds’ portfolios at the end of September. There were 8 hedge funds in our database with PDS positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are a large number of methods stock market investors employ to size up publicly traded companies. Some of the less known methods are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the top fund managers can outpace the market by a superb margin (see the details here).
Paul Marshall of Marshall Wace
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s go over the key hedge fund action encompassing Precision Drilling Corporation (NYSE:PDS).
What does smart money think about Precision Drilling Corporation (NYSE:PDS)?
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in PDS over the last 17 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.
Among these funds, Mountain Lake Investment Management held the most valuable stake in Precision Drilling Corporation (NYSE:PDS), which was worth $7.4 million at the end of the third quarter. On the second spot was Encompass Capital Advisors which amassed $4.6 million worth of shares. Millennium Management, Citadel Investment Group, and Marshall Wace 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 Corporation (NYSE:PDS), around 3.75% of its 13F portfolio. Signition LP is also relatively very bullish on the stock, setting aside 0.57 percent of its 13F equity portfolio to PDS.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. Marshall Wace, managed by Paul Marshall and Ian Wace, established the biggest position in Precision Drilling Corporation (NYSE:PDS). Marshall Wace had $0.6 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $0.4 million position during the quarter. The following funds were also among the new PDS investors: Michael Platt and William Reeves’s BlueCrest Capital Mgmt. and Noam Gottesman’s GLG Partners.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Precision Drilling Corporation (NYSE:PDS) but similarly valued. We will take a look at CytomX Therapeutics, Inc. (NASDAQ:CTMX), AC Immune SA (NASDAQ:ACIU), BioLife Solutions, Inc. (NASDAQ:BLFS), and Cyclerion Therapeutics, Inc. (NASDAQ:CYCN). This group of stocks’ market caps match PDS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CTMX | 19 | 60912 | 4 |
| ACIU | 7 | 65919 | 0 |
| BLFS | 11 | 81791 | -2 |
| CYCN | 14 | 79668 | -3 |
| Average | 12.75 | 72073 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $16 million in PDS’s case. CytomX Therapeutics, Inc. (NASDAQ:CTMX) is the most popular stock in this table. On the other hand AC Immune SA (NASDAQ:ACIU) is the least popular one with only 7 bullish hedge fund positions. Precision Drilling Corporation (NYSE:PDS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately PDS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PDS investors were disappointed as the stock returned -7% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
