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 elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Dollar General Corp. (NYSE:DG).
Is Dollar General Corp. (NYSE:DG) the right pick for your portfolio? Our calculations show that the smart money is in a pessimistic mood. The number of long hedge fund bets dropped by 9 in recent months. DG was in 49 hedge funds’ portfolios at the end of the third quarter of 2015. There were 58 hedge funds in our database with DG 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 dive in popularity but it may still be more popular than similarly valued stocks. That’s why at the end of this article we will examine companies such as Baxalta Inc (NYSE:BXLT), Public Service Enterprise Group Inc. (NYSE:PEG), and Ryanair Holdings plc (ADR) (NASDAQ:RYAAY) to gather more data points.
How are hedge funds trading Dollar General Corp. (NYSE:DG)?
At the end of the third quarter, a total of 49 of the hedge funds tracked by Insider Monkey were bullish in this stock, a change of -16% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund holdings data compiled by Insider Monkey, OZ Management, managed by Daniel S. Och, holds the most valuable position in Dollar General Corp. (NYSE:DG). OZ Management has a $263.9 million position in the stock, comprising 0.9% of its 13F portfolio. The second most bullish hedge fund manager is Glenview Capital, led by Larry Robbins, holding a $173 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Some other hedge funds with similar optimism consist of Eric W. Mandelblatt’s Soroban Capital Partners, Cliff Asness’s AQR Capital Management and Panayotis Takis Sparaggis’s Alkeon Capital Management.
Since Dollar General Corp. (NYSE:DG) has experienced bearish sentiment from the smart money, it’s safe to say that there lies a certain “tier” of funds that elected to cut their positions entirely at the end of the third quarter. It’s worth mentioning that John Burbank’s Passport Capital dropped the biggest investment of the 700 funds followed by Insider Monkey, valued at an estimated $38.9 million in stock. Leon Cooperman’s fund, Omega Advisors, also said goodbye to its stock, about $12.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 9 funds at the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Dollar General Corp. (NYSE:DG) but similarly valued. These stocks are Baxalta Inc (NYSE:BXLT), Public Service Enterprise Group Inc. (NYSE:PEG), Ryanair Holdings plc (ADR) (NASDAQ:RYAAY), and Southern Copper Corp (NYSE:SCCO). This group of stocks’ market values are similar to DG’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $440 million.That figure was $1480 millions in DG’s case. Baxalta Inc (NYSE:BXLT) is the most popular stock in this table. On the other hand Southern Copper Corp (NYSE:SCCO) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Dollar General Corp. (NYSE:DG) is more popular among hedge funds. Considering that hedge funds are still fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.