The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st. We at Insider Monkey have made an extensive database of more than 866 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Precision Drilling Corp (NYSE:PDS) based on those filings.
Precision Drilling Corp (NYSE:PDS) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of March. Our calculations also showed that PDS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare PDS to other stocks including RR Donnelley & Sons Company (NASDAQ:RRD), Escalade, Inc. (NASDAQ:ESCA), and Bluegreen Vacations Holding Corporation (NYSE:BVH) to get a better sense of its popularity.
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Michael Burry of Scion Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to view the key hedge fund action encompassing Precision Drilling Corp (NYSE:PDS).
Do Hedge Funds Think PDS Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 6 hedge funds with a bullish position in PDS a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
Among these funds, Mountain Lake Investment Management held the most valuable stake in Precision Drilling Corp (NYSE:PDS), which was worth $6.7 million at the end of the fourth quarter. On the second spot was Arrowstreet Capital which amassed $4.9 million worth of shares. Scion Asset Management, Encompass Capital Advisors, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Mountain Lake Investment Management allocated the biggest weight to Precision Drilling Corp (NYSE:PDS), around 3.75% of its 13F portfolio. Scion Asset Management is also relatively very bullish on the stock, dishing out 0.36 percent of its 13F equity portfolio to PDS.
Due to the fact that Precision Drilling Corp (NYSE:PDS) has witnessed declining sentiment from hedge fund managers, logic holds that there lies a certain “tier” of hedgies who were dropping their positions entirely by the end of the first quarter. At the top of the heap, Renaissance Technologies dumped the biggest stake of the 750 funds watched by Insider Monkey, valued at an estimated $3.2 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund dropped about $0.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Precision Drilling Corp (NYSE:PDS) but similarly valued. We will take a look at RR Donnelley & Sons Company (NASDAQ:RRD), Escalade, Inc. (NASDAQ:ESCA), Bluegreen Vacations Holding Corporation (NYSE:BVH), Trevena Inc (NASDAQ:TRVN), Mayville Engineering Company, Inc. (NYSE:MEC), Immersion Corporation (NASDAQ:IMMR), and NuStar GP Holdings, LLC (NYSE:NSH). This group of stocks’ market valuations are similar to PDS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RRD | 23 | 65071 | 10 |
| ESCA | 3 | 10058 | -3 |
| BVH | 6 | 29254 | 0 |
| TRVN | 14 | 8402 | 7 |
| MEC | 3 | 3530 | 0 |
| IMMR | 20 | 71443 | 0 |
| NSH | 21 | 110081 | 1 |
| Average | 12.9 | 42548 | 2.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.9 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $25 million in PDS’s case. RR Donnelley & Sons Company (NASDAQ:RRD) is the most popular stock in this table. On the other hand Escalade, Inc. (NASDAQ:ESCA) is the least popular one with only 3 bullish hedge fund positions. Precision Drilling Corp (NYSE:PDS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PDS is 23.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. A small number of hedge funds were also right about betting on PDS as the stock returned 84.5% since the end of the first quarter (through 6/25) and outperformed the market by an even larger margin.
Follow Precision Drilling Corp (NYSE:PDS)
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Disclosure: None. This article was originally published at Insider Monkey.
