How do we determine whether InterDigital, Inc. (NASDAQ:IDCC) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
InterDigital, Inc. (NASDAQ:IDCC) was in 16 hedge funds' portfolios at the end of the first quarter of 2019. IDCC shareholders have witnessed a decrease in enthusiasm from smart money in recent months. There were 21 hedge funds in our database with IDCC positions at the end of the previous quarter. Our calculations also showed that IDCC isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We're going to view the new hedge fund action regarding InterDigital, Inc. (NASDAQ:IDCC).
Hedge fund activity in InterDigital, Inc. (NASDAQ:IDCC)
At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards IDCC over the last 15 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, Jim Simons's Renaissance Technologies has the number one position in InterDigital, Inc. (NASDAQ:IDCC), worth close to $73.5 million, comprising 0.1% of its total 13F portfolio. Coming in second is D. E. Shaw of D E Shaw, with a $43.9 million position; 0.1% of its 13F portfolio is allocated to the company. Other peers that hold long positions consist of John Overdeck and David Siegel's Two Sigma Advisors, Robert Rodriguez and Steven Romick's First Pacific Advisors LLC and Noam Gottesman's GLG Partners.
Since InterDigital, Inc. (NASDAQ:IDCC) has faced a decline in interest from the smart money, logic holds that there lies a certain "tier" of hedge funds who were dropping their positions entirely last quarter. Intriguingly, Paul Marshall and Ian Wace's Marshall Wace LLP sold off the biggest stake of all the hedgies monitored by Insider Monkey, comprising an estimated $3 million in stock, and Matthew Tewksbury's Stevens Capital Management was right behind this move, as the fund dropped about $2.2 million worth. These moves are important to note, as total hedge fund interest was cut by 5 funds last quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as InterDigital, Inc. (NASDAQ:IDCC) but similarly valued. These stocks are Mantech International Corp (NASDAQ:MANT), Lithia Motors Inc (NYSE:LAD), GCP Applied Technologies Inc. (NYSE:GCP), and Golar LNG Limited (NASDAQ:GLNG). All of these stocks' market caps are similar to IDCC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MANT,12,16915,2 LAD,17,536544,-3 GCP,26,539333,10 GLNG,28,423133,-4 Average,20.75,378981,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $379 million. That figure was $173 million in IDCC's case. Golar LNG Limited (NASDAQ:GLNG) is the most popular stock in this table. On the other hand Mantech International Corp (NASDAQ:MANT) is the least popular one with only 12 bullish hedge fund positions. InterDigital, Inc. (NASDAQ:IDCC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately IDCC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); IDCC investors were disappointed as the stock returned -2.7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.