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Dime Community Bancshares, Inc. (DCOM): Are Hedge Funds Right About This Stock?

The latest 13F reporting period has come and gone, and 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. Now, 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 you are going to find out whether hedge funds thoughtDime Community Bancshares, Inc. (NASDAQ:DCOM) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Hedge fund interest in Dime Community Bancshares, Inc. (NASDAQ:DCOM) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Diamond S Shipping Inc. (NYSE:DSSI), Brigham Minerals, Inc. (NYSE:MNRL), and Enova International Inc (NYSE:ENVA) to gather more data points. Our calculations also showed that DCOM 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.

CITADEL INVESTMENT GROUP

Ken Griffin of Citadel Investment Group

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. With all of this in mind we’re going to take a gander at the key hedge fund action encompassing Dime Community Bancshares, Inc. (NASDAQ:DCOM).

How are hedge funds trading Dime Community Bancshares, Inc. (NASDAQ:DCOM)?

Heading into the second quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DCOM over the last 18 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the most valuable position in Dime Community Bancshares, Inc. (NASDAQ:DCOM), worth close to $14.4 million, comprising less than 0.1%% of its total 13F portfolio. The second largest stake is held by Polaris Capital Management, managed by Bernard Horn, which holds a $11.9 million position; 0.7% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism contain Israel Englander’s Millennium Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and John D. Gillespie’s Prospector Partners. In terms of the portfolio weights assigned to each position Polaris Capital Management allocated the biggest weight to Dime Community Bancshares, Inc. (NASDAQ:DCOM), around 0.72% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, setting aside 0.36 percent of its 13F equity portfolio to DCOM.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Tudor Investment Corp. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Dime Community Bancshares, Inc. (NASDAQ:DCOM) but similarly valued. We will take a look at Diamond S Shipping Inc. (NYSE:DSSI), Brigham Minerals, Inc. (NYSE:MNRL), Enova International Inc (NYSE:ENVA), and Pacific Biosciences of California, Inc. (NASDAQ:PACB). This group of stocks’ market caps match DCOM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DSSI 16 50899 -2
MNRL 19 54263 -4
ENVA 17 81510 -4
PACB 18 75493 -5
Average 17.5 65541 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $38 million in DCOM’s case. Brigham Minerals, Inc. (NYSE:MNRL) is the most popular stock in this table. On the other hand Diamond S Shipping Inc. (NYSE:DSSI) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Dime Community Bancshares, Inc. (NASDAQ:DCOM) is even less popular than DSSI. Hedge funds dodged a bullet by taking a bearish stance towards DCOM. Our calculations showed that the top 10 most popular hedge fund stocks 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 managed to beat the market by 15.5 percentage points. Unfortunately DCOM wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); DCOM investors were disappointed as the stock returned 1% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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