The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Parker Drilling Company (NYSE:PKD) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Hedge fund interest in Parker Drilling Company (NYSE:PKD) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as 22nd Century Group, Inc (NYSE:XXII), Pivotal Investment Corporation II (NYSE:PIC), and Lumber Liquidators Holdings Inc (NYSE:LL) to gather more data points. Our calculations also showed that PKD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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 many metrics stock traders put to use to value publicly traded companies. Two of the less utilized metrics are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the best investment managers can outperform the S&P 500 by a solid amount (see the details here).
Paul Marshall of Marshall Wace
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s take a look at the key hedge fund action surrounding Parker Drilling Company (NYSE:PKD).
What have hedge funds been doing with Parker Drilling Company (NYSE:PKD)?
At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in PKD a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Don Morgan’s Brigade Capital has the biggest position in Parker Drilling Company (NYSE:PKD), worth close to $62.2 million, accounting for 3.3% of its total 13F portfolio. On Brigade Capital’s heels is Highbridge Capital Management holding a $22.7 million position; the fund has 3.3% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish comprise Andy Redleaf’s Whitebox Advisors, Paul Marshall and Ian Wace’s Marshall Wace and . In terms of the portfolio weights assigned to each position Brigade Capital allocated the biggest weight to Parker Drilling Company (NYSE:PKD), around 3.34% of its 13F portfolio. Highbridge Capital Management is also relatively very bullish on the stock, dishing out 3.31 percent of its 13F equity portfolio to PKD.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Marshall Wace).
Let’s check out hedge fund activity in other stocks similar to Parker Drilling Company (NYSE:PKD). We will take a look at 22nd Century Group, Inc (NYSE:XXII), Pivotal Investment Corporation II (NYSE:PIC), Lumber Liquidators Holdings Inc (NYSE:LL), and J.C. Penney Company, Inc. (NYSE:JCP). This group of stocks’ market caps match PKD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| XXII | 2 | 227 | -1 |
| PIC | 15 | 50569 | 15 |
| LL | 10 | 20454 | -3 |
| JCP | 18 | 27425 | 6 |
| Average | 11.25 | 24669 | 4.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $91 million in PKD’s case. J.C. Penney Company, Inc. (NYSE:JCP) is the most popular stock in this table. On the other hand 22nd Century Group, Inc (NYSE:XXII) is the least popular one with only 2 bullish hedge fund positions. Parker Drilling Company (NYSE:PKD) 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 PKD wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PKD investors were disappointed as the stock returned 1% 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.
