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While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding IDT Corporation (NYSE:IDT).
Is IDT Corporation (NYSE:IDT) an outstanding investment right now? Hedge funds were in a bullish mood. The number of long hedge fund positions rose by 1 lately. IDT Corporation (NYSE:IDT) was in 7 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 14. Our calculations also showed that IDT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Roger Ibbotson of Zebra Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind we're going to analyze the recent hedge fund action regarding IDT Corporation (NYSE:IDT).
Hedge fund activity in IDT Corporation (NYSE:IDT)
At the end of September, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the second quarter of 2020. By comparison, 12 hedge funds held shares or bullish call options in IDT a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in IDT Corporation (NYSE:IDT) was held by Renaissance Technologies, which reported holding $11.2 million worth of stock at the end of September. It was followed by D E Shaw with a $4.4 million position. Other investors bullish on the company included Kahn Brothers, Zebra Capital Management, and Millennium Management. In terms of the portfolio weights assigned to each position Kahn Brothers allocated the biggest weight to IDT Corporation (NYSE:IDT), around 0.83% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, designating 0.61 percent of its 13F equity portfolio to IDT.
As industrywide interest jumped, some big names have been driving this bullishness. PDT Partners, managed by Peter Muller, created the most valuable position in IDT Corporation (NYSE:IDT). PDT Partners had $0.1 million invested in the company at the end of the quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as IDT Corporation (NYSE:IDT) but similarly valued. We will take a look at Mohawk Group Holdings, Inc. (NASDAQ:MWK), FS Bancorp, Inc. (NASDAQ:FSBW), Aurora Mobile Limited (NASDAQ:JG), Sky Solar Holdings, Ltd. (NASDAQ:SKYS), Taiwan Liposome Company, Ltd. (NASDAQ:TLC), Hertz Global Holdings, Inc. (NYSE:HTZ), and Lifevantage Corporation (NASDAQ:LFVN). This group of stocks' market caps are similar to IDT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MWK,4,8703,1 FSBW,5,11860,1 JG,1,389,0 SKYS,1,426,0 TLC,1,167,0 HTZ,8,2761,-4 LFVN,7,18068,-2 Average,3.9,6053,-0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.9 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $21 million in IDT's case. Hertz Global Holdings, Inc. (NYSE:HTZ) is the most popular stock in this table. On the other hand Aurora Mobile Limited (NASDAQ:JG) is the least popular one with only 1 bullish hedge fund positions. IDT Corporation (NYSE:IDT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IDT is 63.9. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on IDT as the stock returned 89.4% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.