The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Ion Geophysical Corp (NYSE:IO).
Is Ion Geophysical Corp (NYSE:IO) going to take off soon? The best stock pickers are becoming less hopeful. The number of long hedge fund positions fell by 5 lately. Our calculations also showed that IO 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.
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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 51 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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 let's take a look at the recent hedge fund action regarding Ion Geophysical Corp (NYSE:IO).
How are hedge funds trading Ion Geophysical Corp (NYSE:IO)?
Heading into the second quarter of 2020, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -50% from the previous quarter. The graph below displays the number of hedge funds with bullish position in IO over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Ion Geophysical Corp (NYSE:IO) was held by Renaissance Technologies, which reported holding $1.4 million worth of stock at the end of September. It was followed by Gates Capital Management with a $0.4 million position. Other investors bullish on the company included Royce & Associates, Two Sigma Advisors, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Gates Capital Management allocated the biggest weight to Ion Geophysical Corp (NYSE:IO), around 0.03% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.0015 percent of its 13F equity portfolio to IO.
Since Ion Geophysical Corp (NYSE:IO) has experienced declining sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of hedge funds that elected to cut their positions entirely by the end of the first quarter. It's worth mentioning that D. E. Shaw's D E Shaw cut the largest investment of the "upper crust" of funds monitored by Insider Monkey, valued at an estimated $0.3 million in stock. Israel Englander's fund, Millennium Management, also sold off its stock, about $0.3 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 5 funds by the end of the first quarter.
Let's also examine hedge fund activity in other stocks similar to Ion Geophysical Corp (NYSE:IO). These stocks are Rosehill Resources Inc. (NASDAQ:ROSE), BBQ Holdings, Inc. (NASDAQ:BBQ), KLX Energy Services Holdings, Inc. (NASDAQ:KLXE), and Lazydays Holdings, Inc. (NASDAQ:LAZY). All of these stocks' market caps match IO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ROSE,4,325,1 BBQ,4,7092,1 KLXE,14,2577,-5 LAZY,5,3627,0 Average,6.75,3405,-0.75 [/table]
As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $2 million in IO's case. KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) is the most popular stock in this table. On the other hand Rosehill Resources Inc. (NASDAQ:ROSE) is the least popular one with only 4 bullish hedge fund positions. Ion Geophysical Corp (NYSE:IO) is not the least popular stock in this group but hedge fund interest is still below average. 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 gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on IO as the stock returned 85.8% during the second quarter and outperformed the market by an even larger margin.
