Hedge Funds Are Dumping Deluxe Corporation (DLX)

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Deluxe Corporation (NYSE:DLX) .

Deluxe Corporation (NYSE:DLX) has seen a decrease in activity from the world’s largest hedge funds in recent months. There were 20 hedge funds in our database with DLX 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 Companhia Energetica Minas Gerais (ADR) (NYSE:CIG), Cantel Medical Corp. (NYSE:CMN), and American Eagle Outfitters (NYSE:AEO) 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.

Keeping this in mind, let’s take a gander at the key action encompassing Deluxe Corporation (NYSE:DLX).

What have hedge funds been doing with Deluxe Corporation (NYSE:DLX)?

Heading into the fourth quarter of 2016, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DLX over the last 5 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Cliff Asness’s AQR Capital Management has the biggest position in Deluxe Corporation (NYSE:DLX), worth close to $38.3 million, comprising 0.1% of its total 13F portfolio. The second most bullish fund manager is McKinley Capital Management, led by Robert B. Gillam, holding a $23.6 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Some other peers that are bullish include Thomas Bailard’s Bailard Inc, Ken Griffin’s Citadel Investment Group and D. E. Shaw’s D E Shaw. 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.

Because Deluxe Corporation (NYSE:DLX) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of funds that elected to cut their full holdings in the third quarter. It’s worth mentioning that Matthew Tewksbury’s Stevens Capital Management cashed in the largest position of all the investors monitored by Insider Monkey, valued at about $1.5 million in stock. Joshua Packwood and Schuster Tanger’s fund, Radix Partners, also dumped its stock, about $0.4 million worth of DLX shares.

Let’s go over hedge fund activity in other stocks similar to Deluxe Corporation (NYSE:DLX). These stocks are Companhia Energetica Minas Gerais (ADR) (NYSE:CIG), Cantel Medical Corp. (NYSE:CMN), American Eagle Outfitters (NYSE:AEO), and Brookdale Senior Living, Inc. (NYSE:BKD). This group of stocks’ market values are similar to DLX’s market value.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $361 million. That figure was $87 million in DLX’s case. Brookdale Senior Living, Inc. (NYSE:BKD) is the most popular stock in this table. On the other hand Companhia Energetica Minas Gerais (ADR) (NYSE:CIG) is the least popular one with only 13 bullish hedge fund positions. Deluxe Corporation (NYSE:DLX) 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. In this regard BKD might be a better candidate to consider taking a long position in.

Disclosure: none.