Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Daktronics, Inc. (NASDAQ:DAKT) from the perspective of those elite funds.
Daktronics, Inc. (NASDAQ:DAKT) has experienced a decrease in enthusiasm from smart money of late. 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 CU Bancorp (NASDAQ:CUNB), The First of Long Island Corporation (NASDAQ:FLIC), and Mechel OAO (ADR) (NYSE:MTL) to gather more data points.
In the eyes of most stock holders, hedge funds are perceived as underperforming, old investment vehicles of years past. While there are more than an 8000 funds with their doors open at the moment, Our experts hone in on the masters of this group, about 700 funds. It is estimated that this group of investors have their hands on the majority of all hedge funds’ total asset base, and by monitoring their matchless stock picks, Insider Monkey has figured out numerous investment strategies that have historically defeated the broader indices. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Keeping this in mind, we’re going to go over the recent action encompassing Daktronics, Inc. (NASDAQ:DAKT).
Hedge fund activity in Daktronics, Inc. (NASDAQ:DAKT)
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 23% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the biggest position in Daktronics, Inc. (NASDAQ:DAKT). The fund reportedly holds a $8.2 million position in the stock, comprising less than 0.1% of its 13F portfolio. The second most bullish fund manager is Renaissance Technologies, led by Jim Simons, holding a $1.7 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism comprise Mario Gabelli’s GAMCO Investors, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and John Overdeck and David Siegel’s Two Sigma Advisors.
Due to the fact that Daktronics, Inc. (NASDAQ:DAKT) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of fund managers who sold off their positions entirely by the end of the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management cut the biggest position of the 700 funds monitored by Insider Monkey, valued at an estimated $0.6 million in stock, and Neil Chriss’s Hutchin Hill Capital was right behind this move, as the fund dropped about $0.4 million worth of DAKT shares. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Daktronics, Inc. (NASDAQ:DAKT) but similarly valued. We will take a look at CU Bancorp (NASDAQ:CUNB), The First of Long Island Corporation (NASDAQ:FLIC), Mechel OAO (ADR) (NYSE:MTL), and Primero Mining Corp (NYSE:PPP). All of these stocks’ market caps are closest to DAKT’s market cap.
|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 7 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $13 million in DAKT’s case. Primero Mining Corp (NYSE:PPP) is the most popular stock in this table. On the other hand The First of Long Island Corporation (NASDAQ:FLIC) and Mechel OAO (ADR) (NYSE:MTL) are the least popular ones with only 6 bullish hedge fund positions. Compared to these stocks Daktronics, Inc. (NASDAQ:DAKT) is more popular among hedge funds. Considering that hedge funds are 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.