Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about DIRTT Environmental Solutions Ltd. (NASDAQ:DRTT) in this article.
Is DIRTT Environmental Solutions Ltd. (NASDAQ:DRTT) going to take off soon? The best stock pickers were in a bearish mood. The number of bullish hedge fund bets dropped by 1 in recent months. DIRTT Environmental Solutions Ltd. (NASDAQ:DRTT) was in 4 hedge funds’ portfolios at the end of March. The all time high for this statistic is 12. Our calculations also showed that DRTT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 5 hedge funds in our database with DRTT positions at the end of the fourth quarter.
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
David Nierenberg of Nierenberg Investment Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $27 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to analyze the latest hedge fund action regarding DIRTT Environmental Solutions Ltd. (NASDAQ:DRTT).
Do Hedge Funds Think DRTT Is A Good Stock To Buy Now?
At Q1’s end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards DRTT over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, MAK Capital One, managed by Michael Kaufman, holds the largest position in DIRTT Environmental Solutions Ltd. (NASDAQ:DRTT). MAK Capital One has a $26.7 million position in the stock, comprising 6.3% of its 13F portfolio. Sitting at the No. 2 spot is Ari Zweiman of 683 Capital Partners, with a $22.9 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions comprise David Nierenberg’s Nierenberg Investment Management, John Overdeck and David Siegel’s Two Sigma Advisors and . In terms of the portfolio weights assigned to each position MAK Capital One allocated the biggest weight to DIRTT Environmental Solutions Ltd. (NASDAQ:DRTT), around 6.34% of its 13F portfolio. 683 Capital Partners is also relatively very bullish on the stock, dishing out 1.21 percent of its 13F equity portfolio to DRTT.
Judging by the fact that DIRTT Environmental Solutions Ltd. (NASDAQ:DRTT) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of money managers who were dropping their entire stakes last quarter. Intriguingly, Chuck Royce’s Royce & Associates dropped the biggest stake of the 750 funds followed by Insider Monkey, totaling about $0.2 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund dropped about $0 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 1 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to DIRTT Environmental Solutions Ltd. (NASDAQ:DRTT). We will take a look at Americas Gold and Silver Corporation (NYSE:USAS), Express, Inc. (NYSE:EXPR), Willis Lease Finance Corporation (NASDAQ:WLFC), KemPharm Inc (NASDAQ:KMPH), AFC Gamma, Inc. (NASDAQ:AFCG), Esports Entertainment Group Inc. (NASDAQ:GMBL), and Nathan’s Famous, Inc. (NASDAQ:NATH). This group of stocks’ market caps are closest to DRTT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| USAS | 2 | 1586 | -2 |
| EXPR | 12 | 52710 | -2 |
| WLFC | 2 | 17083 | 0 |
| KMPH | 6 | 3923 | 6 |
| AFCG | 5 | 15027 | 5 |
| GMBL | 4 | 2956 | 3 |
| NATH | 4 | 29713 | -2 |
| Average | 5 | 17571 | 1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $51 million in DRTT’s case. Express, Inc. (NYSE:EXPR) is the most popular stock in this table. On the other hand Americas Gold and Silver Corporation (NYSE:USAS) is the least popular one with only 2 bullish hedge fund positions. DIRTT Environmental Solutions Ltd. (NASDAQ:DRTT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DRTT is 24. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on DRTT as the stock returned 15.2% since the end of the first quarter (through 6/11) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
