Are Hedge Funds Still Bullish On Dycom Industries, Inc. (DY)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Dycom Industries, Inc. (NYSE:DY).

Dycom Industries, Inc. (NYSE:DY) investors should pay attention to a decrease in activity from the world’s largest hedge funds lately. DY was in 17 hedge funds’ portfolios at the end of March. There were 18 hedge funds in our database with DY holdings at the end of the previous quarter. Our calculations also showed that DY 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

William Harnisch

William Harnisch of Peconic Partners LLC

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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. With all of this in mind we’re going to review the key hedge fund action surrounding Dycom Industries, Inc. (NYSE:DY).

How have hedgies been trading Dycom Industries, Inc. (NYSE:DY)?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards DY over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is DY A Good Stock To Buy?

Among these funds, ACK Asset Management held the most valuable stake in Dycom Industries, Inc. (NYSE:DY), which was worth $24.8 million at the end of the third quarter. On the second spot was Peconic Partners LLC which amassed $13 million worth of shares. Millennium Management, Empyrean Capital Partners, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position ACK Asset Management allocated the biggest weight to Dycom Industries, Inc. (NYSE:DY), around 12.38% of its 13F portfolio. Peconic Partners LLC is also relatively very bullish on the stock, designating 5.03 percent of its 13F equity portfolio to DY.

Judging by the fact that Dycom Industries, Inc. (NYSE:DY) has experienced falling interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedge funds that decided to sell off their positions entirely heading into Q4. At the top of the heap, Howard Marks’s Oaktree Capital Management sold off the largest stake of the 750 funds monitored by Insider Monkey, worth close to $19.8 million in stock. Michael O’Keefe’s fund, 12th Street Asset Management, also dumped its stock, about $6 million worth. These moves are interesting, as aggregate hedge fund interest fell by 1 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to Dycom Industries, Inc. (NYSE:DY). These stocks are Douglas Dynamics Inc (NYSE:PLOW), CTS Corporation (NYSE:CTS), Ameresco Inc (NYSE:AMRC), and Huami Corporation (NYSE:HMI). This group of stocks’ market caps match DY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PLOW 9 14986 -3
CTS 9 67636 -1
AMRC 11 46335 3
HMI 5 20451 -4
Average 8.5 37352 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $83 million in DY’s case. Ameresco Inc (NYSE:AMRC) is the most popular stock in this table. On the other hand Huami Corporation (NYSE:HMI) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Dycom Industries, Inc. (NYSE:DY) is more popular among hedge funds. 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 returned 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on DY as the stock returned 57.9% so far in Q2 (through June 22nd) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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Disclosure: None. This article was originally published at Insider Monkey.