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Dixie Group Inc (DXYN): Are Hedge Funds Right About This Stock?

Between June 25 and October 30th the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Dixie Group Inc (NASDAQ:DXYN) and see how the stock is affected by the recent hedge fund activity.

Is Dixie Group Inc (NASDAQ:DXYN) worth your attention right now? Prominent investors are getting less bullish. The number of long hedge fund positions retreated by 1 recently. It is important to consider that the shares of Dixie Group Inc (NASDAQ:DXYN) were down 20.38% during the third quarter. One may call this trading sentiment responsible for the hedge fund behavior, but without sufficient validation. For an in-depth understanding of the situation, we will cover hedge funds that held positions in Dixie Group Inc (NASDAQ:DXYN) at the end of September.

At the end of this article, we will also compare Dixie Group Inc (NASDAQ:DXYN) to other stocks including Unilife Corp (NASDAQ:UNIS), Accuride Corporation (NYSE:ACW), and Lantheus Holdings Inc (NASDAQ:LNTH) to get a better sense of its popularity.

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According to most shareholders, hedge funds are seen as slow, old financial vehicles of yesteryear. While there are over 8000 funds trading at the moment, We look at the upper echelon of this club, approximately 700 funds. It is estimated that this group of investors oversees the lion’s share of the hedge fund industry’s total asset base, and by tailing their top investments, Insider Monkey has discovered numerous investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Now, let’s go over the fresh action surrounding Dixie Group Inc (NASDAQ:DXYN).

How are hedge funds trading Dixie Group Inc (NASDAQ:DXYN)?

At the end of Q3, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a decline of 17% from the second quarter. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Chuck Royce’s Royce & Associates has the biggest position in Dixie Group Inc (NASDAQ:DXYN), worth close to $12.4 million, comprising 0.1% of its total 13F portfolio. The second largest stake is held by Portolan Capital Management, led by George McCabe, holding a $2.6 million position; 0.3% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions encompass Ken Grossman and Glen Schneider’s SG Capital Management, Israel Englander’s Millennium Management, and D E Shaw.

Because Dixie Group Inc (NASDAQ:DXYN) has experienced a declination in interest from the entirety of the hedge funds we track, it’s safe to say that there is a sect of fund managers that elected to cut their full holdings by the end of the third quarter. Intriguingly, Michael Reeber’s Andalusian Capital Partners cut the biggest position of the 700 funds monitored by Insider Monkey, valued at about $1.4 million in stock, and Renaissance Technologies was right behind this move, as the fund sold off about $0.2 million worth of shares. These transactions are interesting, as aggregate hedge fund interest fell by 1 fund by the end of the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Dixie Group Inc (NASDAQ:DXYN) but similarly valued. These stocks are Unilife Corp (NASDAQ:UNIS), Accuride Corporation (NYSE:ACW), Lantheus Holdings Inc (NASDAQ:LNTH), and Abeona Therapeutics Inc (NASDAQ:ABEO). This group of stocks’ market valuations are closest to Dixie Group Inc (NASDAQ:DXYN)’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UNIS 4 3188 -4
ACW 13 30594 -1
LNTH 4 11135 -1
ABEO 8 23696 2

As you can see, these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $17 million in Dixie Group Inc (NASDAQ:DXYN)’s case. Accuride Corporation (NYSE:ACW) is the most popular stock in this table. On the other hand, Unilife Corp (NASDAQ:UNIS) is the least popular one with only 4 bullish hedge fund positions. Dixie Group Inc (NASDAQ:DXYN) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Accuride Corporation (NYSE:ACW) might be a better candidate to consider a long position.

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