In this article we will check out the progression of hedge fund sentiment towards Independence Contract Drilling Inc (NYSE:ICD) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Independence Contract Drilling Inc (NYSE:ICD) investors should pay attention to a decrease in hedge fund interest in recent months. Our calculations also showed that ICD isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_340081" align="aligncenter" width="395"] Phill Gross of Adage Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to review the new hedge fund action encompassing Independence Contract Drilling Inc (NYSE:ICD).
How have hedgies been trading Independence Contract Drilling Inc (NYSE:ICD)?
Heading into the second quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -30% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ICD over the last 18 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Marc Lisker, Glenn Fuhrman and John Phelan's MSDC Management has the biggest position in Independence Contract Drilling Inc (NYSE:ICD), worth close to $1.3 million, amounting to 0.4% of its total 13F portfolio. The second most bullish fund manager is MSD Capital, led by Glenn Fuhrman and John Phelan, holding a $0.3 million position; the fund has 1.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism encompass Jonathan Berger's Birch Grove Capital, Brett Hendrickson's Nokomis Capital and Phill Gross and Robert Atchinson's Adage Capital Management. In terms of the portfolio weights assigned to each position MSD Capital allocated the biggest weight to Independence Contract Drilling Inc (NYSE:ICD), around 1.08% of its 13F portfolio. Birch Grove Capital is also relatively very bullish on the stock, setting aside 0.42 percent of its 13F equity portfolio to ICD.
Because Independence Contract Drilling Inc (NYSE:ICD) has witnessed falling interest from hedge fund managers, we can see that there exists a select few money managers that elected to cut their positions entirely last quarter. Intriguingly, John Overdeck and David Siegel's Two Sigma Advisors sold off the largest position of all the hedgies watched by Insider Monkey, comprising close to $0.1 million in stock. D. E. Shaw's fund, D E Shaw, also cut its stock, about $0 million worth. These moves are important to note, as total hedge fund interest dropped by 3 funds last quarter.
Let's check out hedge fund activity in other stocks similar to Independence Contract Drilling Inc (NYSE:ICD). These stocks are Qualstar Corporation (NASDAQ:QBAK), Barnwell Industries, Inc. (NYSE:BRN), Avalon Holdings Corp (NYSE:AWX), and Cemtrex Inc. (NASDAQ:CETX). All of these stocks' market caps are closest to ICD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QBAK,1,375,0 BRN,1,100,0 AWX,1,43,0 CETX,3,196,2 Average,1.5,179,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.5 hedge funds with bullish positions and the average amount invested in these stocks was $0 million. That figure was $2 million in ICD's case. Cemtrex Inc. (NASDAQ:CETX) is the most popular stock in this table. On the other hand Qualstar Corporation (NASDAQ:QBAK) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Independence Contract Drilling Inc (NYSE:ICD) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on ICD as the stock returned 314.3% so far in Q2 (through June 10th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.