Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze Independence Contract Drilling Inc (NYSE:ICD) from the perspective of those successful funds.
Is Independence Contract Drilling Inc (NYSE:ICD) a safe investment today? Hedge funds are surely in a pessimistic mood. The number of bullish hedge fund positions that are disclosed in regulatory 13F filings fell by 3 in recent months. There were 14 hedge funds in our database with ICD holdings at the end of June. 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 Blackstone/GSO Long-Short Credit Income (NYSE:BGX), Limelight Networks, Inc. (NASDAQ:LLNW), and MiX Telematics Ltd – ADR (NYSE:MIXT) to gather more data points.
Follow Independence Contract Drilling Inc. (NYSE:ICD)
Follow Independence Contract Drilling Inc. (NYSE:ICD)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Keeping this in mind, we’re going to take a look at the recent action surrounding Independence Contract Drilling Inc (NYSE:ICD).
What have hedge funds been doing with Independence Contract Drilling Inc (NYSE:ICD)?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from the second quarter of 2016. By comparison, 5 hedge funds held shares or bullish call options in ICD heading into this year. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Phill Gross and Robert Atchinson’s Adage Capital Management has the most valuable position in Independence Contract Drilling Inc (NYSE:ICD), worth close to $9.7 million, amounting to less than 0.1%% of its total 13F portfolio. The second largest stake is held by Balyasny Asset Management, led by Dmitry Balyasny, which holds a $1.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism consist of Chuck Royce’s Royce & Associates, Renaissance Technologies, one of the largest hedge funds in the world and Israel Englander’s Millennium Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that got rid of their entire stakes in the stock during the third quarter. At the top of the heap, Todd J. Kantor’s Encompass Capital Advisors got rid of the largest stake of the 700 funds watched by Insider Monkey, comprising an estimated $3.2 million in stock. GLG Partners also cut its stock, about $2.3 million worth.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Independence Contract Drilling Inc (NYSE:ICD) but similarly valued. We will take a look at Blackstone/GSO Long-Short Credit Income (NYSE:BGX), Limelight Networks, Inc. (NASDAQ:LLNW), MiX Telematics Ltd – ADR (NYSE:MIXT), and Charter Financial Corp (NASDAQ:CHFN). This group of stocks’ market valuations resemble ICD’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BGX | 3 | 21422 | 0 |
| LLNW | 8 | 11482 | -1 |
| MIXT | 3 | 5873 | 0 |
| CHFN | 7 | 29180 | -3 |
As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $16 million in ICD’s case. Limelight Networks, Inc. (NASDAQ:LLNW) is the most popular stock in this table. On the other hand Blackstone/GSO Long-Short Credit Income (NYSE:BGX) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Independence Contract Drilling Inc (NYSE:ICD) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
