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Do Hedge Funds Love Destination XL Group Inc (DXLG)?

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. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Destination XL Group Inc (NASDAQ:DXLG).

Hedge fund interest in Destination XL Group Inc (NASDAQ:DXLG) 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 Image Sensing Systems, Inc. (NASDAQ:ISNS), Usio, Inc. (NASDAQ:USIO), and Motus GI Holdings, Inc. (NASDAQ:MOTS) to gather more data points. Our calculations also showed that DXLG 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.

Carlo Cannell

J. Carlo Cannell of Cannell Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s review the key hedge fund action regarding Destination XL Group Inc (NASDAQ:DXLG).

How have hedgies been trading Destination XL Group Inc (NASDAQ:DXLG)?

At the end of the first quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in DXLG a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Destination XL Group Inc (NASDAQ:DXLG) was held by Red Mountain Capital, which reported holding $3 million worth of stock at the end of September. It was followed by Cannell Capital with a $1.9 million position. Other investors bullish on the company included Prescott Group Capital Management, Renaissance Technologies, and Roumell Asset Management. In terms of the portfolio weights assigned to each position Red Mountain Capital allocated the biggest weight to Destination XL Group Inc (NASDAQ:DXLG), around 5.16% of its 13F portfolio. Cannell Capital is also relatively very bullish on the stock, setting aside 0.79 percent of its 13F equity portfolio to DXLG.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the first quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s now review hedge fund activity in other stocks similar to Destination XL Group Inc (NASDAQ:DXLG). These stocks are Image Sensing Systems, Inc. (NASDAQ:ISNS), Usio, Inc. (NASDAQ:USIO), Motus GI Holdings, Inc. (NASDAQ:MOTS), and Cleveland BioLabs, Inc. (NASDAQ:CBLI). This group of stocks’ market caps match DXLG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ISNS 1 782 0
USIO 1 40 0
MOTS 10 3748 1
CBLI 2 500 1
Average 3.5 1268 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.5 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $7 million in DXLG’s case. Motus GI Holdings, Inc. (NASDAQ:MOTS) is the most popular stock in this table. On the other hand Image Sensing Systems, Inc. (NASDAQ:ISNS) is the least popular one with only 1 bullish hedge fund positions. Destination XL Group Inc (NASDAQ:DXLG) 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 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on DXLG as the stock returned 82.9% in Q2 (through June 10th) 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.