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Did Hedge Funds Make The Right Call On Dicks Sporting Goods Inc (DKS) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Dicks Sporting Goods Inc (NYSE:DKS) and determine whether the smart money was really smart about this stock.

Dicks Sporting Goods Inc (NYSE:DKS) investors should be aware of an increase in hedge fund sentiment recently. DKS was in 27 hedge funds’ portfolios at the end of March. There were 26 hedge funds in our database with DKS positions at the end of the previous quarter. Our calculations also showed that DKS 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Steve Leonard Pacifica Capital

Steve Leonard of Pacifica Capital

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 Dicks Sporting Goods Inc (NYSE:DKS).

What have hedge funds been doing with Dicks Sporting Goods Inc (NYSE:DKS)?

At Q1’s end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in DKS 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.

According to Insider Monkey’s hedge fund database, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the number one position in Dicks Sporting Goods Inc (NYSE:DKS). Arrowstreet Capital has a $35.2 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Tensile Capital, led by Douglas Dossey and Arthur Young, holding a $24.2 million position; 4.8% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish consist of D. E. Shaw’s D E Shaw, Israel Englander’s Millennium Management and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Tensile Capital allocated the biggest weight to Dicks Sporting Goods Inc (NYSE:DKS), around 4.77% of its 13F portfolio. Pacifica Capital Investments is also relatively very bullish on the stock, setting aside 1.6 percent of its 13F equity portfolio to DKS.

Now, specific money managers were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, created the largest position in Dicks Sporting Goods Inc (NYSE:DKS). Balyasny Asset Management had $6 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also made a $4.9 million investment in the stock during the quarter. The other funds with brand new DKS positions are Alexander Mitchell’s Scopus Asset Management, Steve Leonard’s Pacifica Capital Investments, and Joel Greenblatt’s Gotham Asset Management.

Let’s go over hedge fund activity in other stocks similar to Dicks Sporting Goods Inc (NYSE:DKS). These stocks are Compania de Minas Buenaventura S.A.A. (NYSE:BVN), Colliers International Group Inc (NASDAQ:CIGI), Easterly Government Properties Inc (NYSE:DEA), and Sensient Technologies Corporation (NYSE:SXT). All of these stocks’ market caps resemble DKS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BVN 9 55975 -4
CIGI 10 437647 -3
DEA 11 150675 1
SXT 23 83186 3
Average 13.25 181871 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $182 million. That figure was $181 million in DKS’s case. Sensient Technologies Corporation (NYSE:SXT) is the most popular stock in this table. On the other hand Compania de Minas Buenaventura S.A.A. (NYSE:BVN) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Dicks Sporting Goods Inc (NYSE:DKS) 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 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on DKS as the stock returned 95.6% in Q2 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.