We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like InterDigital, Inc. (NASDAQ:IDCC).
InterDigital, Inc. (NASDAQ:IDCC) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 16 hedge funds’ portfolios at the end of the second quarter of 2019. At the end of this article we will also compare IDCC to other stocks including Euronav NV (NYSE:EURN), Myriad Genetics, Inc. (NASDAQ:MYGN), and M.D.C. Holdings, Inc. (NYSE:MDC) to get a better sense of its popularity. Our calculations also showed that IDCC isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to go over the fresh hedge fund action surrounding InterDigital, Inc. (NASDAQ:IDCC).
How have hedgies been trading InterDigital, Inc. (NASDAQ:IDCC)?
At the end of the second quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards IDCC over the last 16 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of InterDigital, Inc. (NASDAQ:IDCC), with a stake worth $79.7 million reported as of the end of March. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $55.8 million. Shannon River Fund Management, Millennium Management, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that InterDigital, Inc. (NASDAQ:IDCC) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few hedge funds that slashed their full holdings by the end of the second quarter. It’s worth mentioning that Michael Johnston’s Steelhead Partners cut the biggest stake of the 750 funds watched by Insider Monkey, worth close to $39.3 million in stock, and Glenn Russell Dubin’s Highbridge Capital Management was right behind this move, as the fund cut about $21 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to InterDigital, Inc. (NASDAQ:IDCC). We will take a look at Euronav NV (NYSE:EURN), Myriad Genetics, Inc. (NASDAQ:MYGN), M.D.C. Holdings, Inc. (NYSE:MDC), and ProPetro Holding Corp. (NYSE:PUMP). This group of stocks’ market valuations are similar to IDCC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EURN | 16 | 153669 | 5 |
| MYGN | 15 | 214253 | -2 |
| MDC | 17 | 81899 | 0 |
| PUMP | 24 | 206397 | 3 |
| Average | 18 | 164055 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $164 million. That figure was $224 million in IDCC’s case. ProPetro Holding Corp. (NYSE:PUMP) is the most popular stock in this table. On the other hand Myriad Genetics, Inc. (NASDAQ:MYGN) is the least popular one with only 15 bullish hedge fund positions. InterDigital, Inc. (NASDAQ:IDCC) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately IDCC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); IDCC investors were disappointed as the stock returned -18.1% during the third 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
