Datalink Corporation (DTLK) Hedge Funds Are Snapping Up

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Datalink Corporation (NASDAQ:DTLK) has seen an increase in hedge fund sentiment lately. DTLK was in 13 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with DTLK positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Tandem Diabetes Care Inc (NASDAQ:TNDM), Enzo Biochem, Inc. (NYSE:ENZ), and vTv Therapeutics Inc (NASDAQ:VTVT) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

What have hedge funds been doing with Datalink Corporation (NASDAQ:DTLK)?

Heading into the fourth quarter of 2016, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a gain of 18% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in DTLK over the last 5 quarters. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Chuck Royce’s Royce & Associates has the largest position in Datalink Corporation (NASDAQ:DTLK), worth close to $9.5 million. On Royce & Associates’s heels is Renaissance Technologies, one of the largest hedge funds in the world, with a $6.3 million position. Other professional money managers with similar optimism comprise Robert B. Gillam’s McKinley Capital Management, D. E. Shaw’s D E Shaw and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As aggregate interest increased, key money managers were leading the bulls’ herd. Glenn Russell Dubin of Highbridge Capital Management created the most valuable position in Datalink Corporation (NASDAQ:DTLK). Highbridge Capital Management had $0.4 million invested in the company at the end of the quarter. Chao Ku’s Nine Chapters Capital Management also initiated a $0.3 million position during the quarter.

Let’s now review hedge fund activity in other stocks similar to Datalink Corporation (NASDAQ:DTLK). We will take a look at Tandem Diabetes Care Inc (NASDAQ:TNDM), Enzo Biochem, Inc. (NYSE:ENZ), vTv Therapeutics Inc (NASDAQ:VTVT), and ImmunoGen, Inc. (NASDAQ:IMGN). This group of stocks’ market caps are similar to DTLK’s market cap.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $26 million in DTLK’s case. ImmunoGen, Inc. (NASDAQ:IMGN) is the most popular stock in this table. On the other hand vTv Therapeutics Inc (NASDAQ:VTVT) is the least popular one with only 3 bullish hedge fund positions. Datalink Corporation (NASDAQ:DTLK) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard IMGN might be a better candidate to consider taking a long position in.

Disclosure: None