Did Hedge Funds Catch A Break With Dolby Laboratories, Inc. (DLB)?

Technology stocks had a lousy start to 2022. QQQ lost 9% of its value in January. Pandemic winners are getting crushed while energy stocks are surging. Roblox lost 36%, Moderna lost 33%, and Carvana and Shopify lost 30% of their values in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Dolby Laboratories, Inc. (NYSE:DLB) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Is Dolby Laboratories, Inc. (NYSE:DLB) a buy here? The best stock pickers were in an optimistic mood. The number of long hedge fund bets increased by 2 in recent months. Dolby Laboratories, Inc. (NYSE:DLB) was in 33 hedge funds’ portfolios at the end of September. The all time high for this statistic is 35. Our calculations also showed that DLB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 31 hedge funds in our database with DLB positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s analyze the fresh hedge fund action encompassing Dolby Laboratories, Inc. (NYSE:DLB).

Do Hedge Funds Think DLB Is A Good Stock To Buy Now?

At third quarter’s end, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 35 hedge funds with a bullish position in DLB a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, SoMa Equity Partners was the largest shareholder of Dolby Laboratories, Inc. (NYSE:DLB), with a stake worth $202.4 million reported as of the end of September. Trailing SoMa Equity Partners was Polar Capital, which amassed a stake valued at $93.9 million. AQR Capital Management, Renaissance Technologies, and Sunriver Management 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 Ararat Capital allocated the biggest weight to Dolby Laboratories, Inc. (NYSE:DLB), around 6.8% of its 13F portfolio. SoMa Equity Partners is also relatively very bullish on the stock, earmarking 5.44 percent of its 13F equity portfolio to DLB.

Consequently, specific money managers were breaking ground themselves. PEAK6 Capital Management, managed by Matthew Hulsizer, initiated the most valuable call position in Dolby Laboratories, Inc. (NYSE:DLB). PEAK6 Capital Management had $3.5 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also initiated a $2 million position during the quarter. The other funds with brand new DLB positions are Michael Gelband’s ExodusPoint Capital, Donald Sussman’s Paloma Partners, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to Dolby Laboratories, Inc. (NYSE:DLB). We will take a look at Genpact Limited (NYSE:G), UGI Corp (NYSE:UGI), Lamb Weston Holdings, Inc. (NYSE:LW), Anaplan, Inc. (NYSE:PLAN), SiteOne Landscape Supply, Inc. (NYSE:SITE), Sibanye Stillwater Limited (NYSE:SBSW), and Credicorp Ltd. (NYSE:BAP). This group of stocks’ market values match DLB’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $588 million. That figure was $521 million in DLB’s case. Anaplan, Inc. (NYSE:PLAN) is the most popular stock in this table. On the other hand Sibanye Stillwater Limited (NYSE:SBSW) is the least popular one with only 9 bullish hedge fund positions. Dolby Laboratories, Inc. (NYSE:DLB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DLB is 58.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on DLB as the stock returned 0.1% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.

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