Is Iridium Communications Inc. (NASDAQ:IRDM) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is Iridium Communications Inc. (NASDAQ:IRDM) the right investment to pursue these days? The smart money is taking a pessimistic view. The number of bullish hedge fund positions decreased by 1 in recent months. Our calculations also showed that IRDM isn’t among the 30 most popular stocks among hedge funds. IRDM was in 12 hedge funds’ portfolios at the end of March. There were 13 hedge funds in our database with IRDM holdings at the end of the previous quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Matthew Hulsizer of PEAK6 Capital
We’re going to take a look at the new hedge fund action regarding Iridium Communications Inc. (NASDAQ:IRDM).
What does smart money think about Iridium Communications Inc. (NASDAQ:IRDM)?
At the end of the first quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in IRDM a year ago. So, let’s see 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, Jim Simons’s Renaissance Technologies has the number one position in Iridium Communications Inc. (NASDAQ:IRDM), worth close to $75.7 million, amounting to 0.1% of its total 13F portfolio. The second most bullish fund manager is GAMCO Investors, led by Mario Gabelli, holding a $16.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism include D. E. Shaw’s D E Shaw, C. Jonathan Gattman’s Cloverdale Capital Management and Chuck Royce’s Royce & Associates.
Due to the fact that Iridium Communications Inc. (NASDAQ:IRDM) has experienced falling interest from the smart money, it’s safe to say that there were a few money managers who sold off their full holdings in the third quarter. Intriguingly, Mitch Kuflik and Rob Sobel’s Brahman Capital dumped the largest investment of all the hedgies tracked by Insider Monkey, totaling an estimated $8.3 million in stock. Israel Englander’s fund, Millennium Management, also said goodbye to its stock, about $0.5 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Iridium Communications Inc. (NASDAQ:IRDM). We will take a look at Neogen Corporation (NASDAQ:NEOG), Corelogic Inc (NYSE:CLGX), J&J Snack Foods Corp. (NASDAQ:JJSF), and Global Blood Therapeutics Inc (NASDAQ:GBT). This group of stocks’ market valuations are closest to IRDM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NEOG | 12 | 32821 | -2 |
| CLGX | 17 | 310733 | -2 |
| JJSF | 14 | 95789 | 4 |
| GBT | 26 | 730224 | 1 |
| Average | 17.25 | 292392 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $292 million. That figure was $140 million in IRDM’s case. Global Blood Therapeutics Inc (NASDAQ:GBT) is the most popular stock in this table. On the other hand Neogen Corporation (NASDAQ:NEOG) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Iridium Communications Inc. (NASDAQ:IRDM) is even less popular than NEOG. Hedge funds dodged a bullet by taking a bearish stance towards IRDM. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately IRDM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); IRDM investors were disappointed as the stock returned -8.9% during the same time frame 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 13 of these stocks already outperformed the market so far in the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.
