Is pdvWireless Inc (PDVW) A Good Stock To Buy?

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Micron and Anadarko Petroleum, have not done well during the last 12 months ending in October due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on an average. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last four quarters ending in October and sixty-three percent of these 30 stocks outperformed the market. S&P 500 Index returned only 5.2% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at pdvWireless Inc (NASDAQ:PDVW) from the perspective of those elite funds.

Is pdvWireless Inc (NASDAQ:PDVW) the right pick for your portfolio? Hedge funds are getting less bullish. The number of long hedge fund positions fell by 4 in recent months. pdvWireless Inc (NASDAQ:PDVW) was in 7 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with pdvWireless Inc (NASDAQ:PDVW) holdings at the end of the previous quarter. 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 Kadant Inc. (NYSE:KAI), Winmark Corporation (NASDAQ:WINA), and Golden Ocean Group Ltd (NASDAQ:GOGL) to gather more data points.

If you’d ask most market participants, hedge funds are viewed as unimportant, old investment vehicles of years past. While there are over 8000 funds trading at the moment, we look at the top tier of this club, about 700 funds. These investment experts shepherd bulk of the smart money’s total asset base, and by keeping track of their best investments, Insider Monkey has revealed several investment strategies that have historically outpaced the market. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Now, we’re going to take a look at the recent action encompassing pdvWireless Inc (NASDAQ:PDVW).

What does the smart money think about pdvWireless Inc (NASDAQ:PDVW)?

Heading into Q4, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 36% from the previous quarter. With the smart money’s sentiment swirling, there exist a few notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Stephen Feinberg’s Cerberus Capital Management has the biggest position in pdvWireless Inc (NASDAQ:PDVW), worth close to $104.4 million, corresponding to 8.7% of its total 13F portfolio. On Cerberus Capital Management’s heels is Jeffrey Altman of Owl Creek Asset Management, with a $51.3 million position; 2.9% of its 13F portfolio is allocated to the company. Hedge funds and other institutional investors that hold long positions consist of Daniel Gold’s QVT Financial, Jody LaNasa and Vivian Lau’s Serengeti Asset Management and Eric Edidin and Josh Lobel’s Archer Capital Management.

Due to the fact that pdvWireless Inc (NASDAQ:PDVW) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there is a sect of fund managers that elected to cut their full holdings in the third quarter. Intriguingly, Edward A. Mule’s Silver Point Capital said goodbye to the biggest position of all the hedgies watched by Insider Monkey, comprising about $8.7 million in stock, and Marc Majzner of Clearline Capital was right behind this move, as the fund said goodbye to about $4.2 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 4 funds in the third quarter.

Let’s now review hedge fund activity in other stocks similar to pdvWireless Inc (NASDAQ:PDVW). We will take a look at Kadant Inc. (NYSE:KAI), Winmark Corporation (NASDAQ:WINA), Golden Ocean Group Ltd (NASDAQ:GOGL), and La Jolla Pharmaceutical Company (NASDAQ:LJPC). All of these stocks’ market caps resemble pdvWireless Inc (NASDAQ:PDVW)’s market cap.

As you can see, these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $190 million in pdvWireless Inc (NASDAQ:PDVW)’s case. Kadant Inc. (NYSE:KAI) is the most popular stock in this table. On the other hand, Winmark Corporation (NASDAQ:WINA) is the least popular one with only 6 bullish hedge fund positions. Even though it is not the least popular stock among the ones in this group, pdwWierless Inc (NASDAQ: PDVW) has not attracted much attention from hedge funds. This may indicate that there are better choices for investments, such as Kadant Inc. (NYSE:KAI), in this particular group.