Did Hedge Funds Make The Right Call On Dana Incorporated (DAN) ?

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 (see why hell is coming). 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 Dana Incorporated (NYSE:DAN) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Dana Incorporated (NYSE:DAN) was in 28 hedge funds’ portfolios at the end of the first quarter of 2020. DAN investors should pay attention to an increase in support from the world’s most elite money managers in recent months. There were 27 hedge funds in our database with DAN positions at the end of the previous quarter. Our calculations also showed that DAN 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.

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Thomas Sandell

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the fresh hedge fund action regarding Dana Incorporated (NYSE:DAN).

What have hedge funds been doing with Dana Incorporated (NYSE:DAN)?

Heading into the second quarter of 2020, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DAN over the last 18 quarters. With hedge funds’ 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).

Is DAN A Good Stock To Buy?

Among these funds, Pzena Investment Management held the most valuable stake in Dana Incorporated (NYSE:DAN), which was worth $30.8 million at the end of the third quarter. On the second spot was GAMCO Investors which amassed $27.6 million worth of shares. AQR Capital Management, Citadel Investment Group, and Balyasny Asset 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 Glendon Capital Management allocated the biggest weight to Dana Incorporated (NYSE:DAN), around 2.94% of its 13F portfolio. Moon Capital is also relatively very bullish on the stock, setting aside 2.29 percent of its 13F equity portfolio to DAN.

As aggregate interest increased, key hedge funds have been driving this bullishness. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the biggest position in Dana Incorporated (NYSE:DAN). Adage Capital Management had $8.5 million invested in the company at the end of the quarter. John W. Moon’s Moon Capital also made a $2.4 million investment in the stock during the quarter. The other funds with brand new DAN positions are Steve Cohen’s Point72 Asset Management, Tom Sandell’s Sandell Asset Management, and Benjamin A. Smith’s Laurion Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Dana Incorporated (NYSE:DAN) but similarly valued. These stocks are Altra Industrial Motion Corp. (NASDAQ:AIMC), Sykes Enterprises, Incorporated (NASDAQ:SYKE), Inogen Inc (NASDAQ:INGN), and DHT Holdings Inc (NYSE:DHT). This group of stocks’ market values resemble DAN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AIMC 15 80915 0
SYKE 14 56085 -4
INGN 12 60103 -9
DHT 34 263246 0
Average 18.75 115087 -3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $115 million. That figure was $144 million in DAN’s case. DHT Holdings Inc (NYSE:DHT) is the most popular stock in this table. On the other hand Inogen Inc (NASDAQ:INGN) is the least popular one with only 12 bullish hedge fund positions. Dana Incorporated (NYSE:DAN) is not the most popular stock in this group but hedge fund interest is still above average. 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 gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on DAN as the stock returned 56.1% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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