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Hedge Funds Never Been Less Bullish On Independence Contract Drilling (ICD)

Reymerlyn Martin
·6 min read

Is Independence Contract Drilling Inc (NYSE:ICD) 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 Independence Contract Drilling Inc (NYSE:ICD) the right investment to pursue these days? The best stock pickers were becoming less hopeful. The number of bullish hedge fund bets were cut by 3 recently. Independence Contract Drilling Inc (NYSE:ICD) was in 3 hedge funds' portfolios at the end of September. The all time high for this statistics is 15. Our calculations also showed that ICD 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). There were 6 hedge funds in our database with ICD positions at the end of the second quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are a multitude of formulas stock traders can use to grade their stock investments. Two of the most innovative formulas are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the best investment managers can trounce the market by a solid amount (see the details here).

CITADEL INVESTMENT GROUP
CITADEL INVESTMENT GROUP

Ken Griffin of Citadel Investment Group

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 10 most profitable companies in the world 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 let's take a glance at the key hedge fund action encompassing Independence Contract Drilling Inc (NYSE:ICD).

What does smart money think about Independence Contract Drilling Inc (NYSE:ICD)?

At Q3's end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -50% from the second quarter of 2020. On the other hand, there were a total of 12 hedge funds with a bullish position in ICD a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

More specifically, MSDC Management was the largest shareholder of Independence Contract Drilling Inc (NYSE:ICD), with a stake worth $2.3 million reported as of the end of September. Trailing MSDC Management was MSD Capital, which amassed a stake valued at $0.5 million. Citadel Investment Group was 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 MSD Capital allocated the biggest weight to Independence Contract Drilling Inc (NYSE:ICD), around 1.12% of its 13F portfolio. MSDC Management is also relatively very bullish on the stock, earmarking 0.48 percent of its 13F equity portfolio to ICD.

Seeing as Independence Contract Drilling Inc (NYSE:ICD) has faced bearish sentiment from the aggregate hedge fund industry, it's safe to say that there is a sect of money managers who sold off their positions entirely by the end of the third quarter. It's worth mentioning that Donald Sussman's Paloma Partners said goodbye to the biggest position of all the hedgies followed by Insider Monkey, totaling about $0.1 million in stock. Greg Eisner's fund, Engineers Gate Manager, also said goodbye to its stock, about $0.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 3 funds by the end of the third quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Independence Contract Drilling Inc (NYSE:ICD) but similarly valued. We will take a look at Nortech Systems Incorporated (NASDAQ:NSYS), Phio Pharmaceuticals Corp. (NASDAQ:PHIO), Supercom Ltd (NASDAQ:SPCB), Professional Diversity Network, Inc. (NASDAQ:IPDN), Safe-T Group Ltd. (NASDAQ:SFET), Fuwei Films (Holdings) Co., Ltd (NASDAQ:FFHL), and Oblong Inc. (NYSE:OBLG). This group of stocks' market values match ICD's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NSYS,1,270,0 PHIO,2,69,1 SPCB,5,1800,3 IPDN,1,18,0 SFET,1,18,0 FFHL,1,1019,0 OBLG,1,426,-1 Average,1.7,517,0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 1.7 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $3 million in ICD's case. Supercom Ltd (NASDAQ:SPCB) is the most popular stock in this table. On the other hand Nortech Systems Incorporated (NASDAQ:NSYS) is the least popular one with only 1 bullish hedge fund positions. Independence Contract Drilling Inc (NYSE:ICD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ICD is 33. 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 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. Hedge funds were also right about betting on ICD as the stock returned 36.1% since the end of Q3 (through 11/23) 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.

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