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Do Hedge Funds Love Dycom Industries, Inc. (DY)?

Is Dycom Industries, Inc. (NYSE:DY) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy league graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Dycom Industries, Inc. (NYSE:DY) has seen a decrease in support from the world’s most elite money managers recently. DY was in 23 hedge funds’ portfolios at the end of September. There were 26 hedge funds in our database with DY positions at the end of the previous quarter. Our calculations also showed that DY isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Keidan of Buckingham Capital

We’re going to take a glance at the recent hedge fund action surrounding Dycom Industries, Inc. (NYSE:DY).

Hedge fund activity in Dycom Industries, Inc. (NYSE:DY)

At Q3’s end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DY over the last 13 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.

DY_dec2018

Among these funds, PAR Capital Management held the most valuable stake in Dycom Industries, Inc. (NYSE:DY), which was worth $100.1 million at the end of the third quarter. On the second spot was ACK Asset Management which amassed $25.6 million worth of shares. Moreover, Black-and-White Capital, 1060 Capital Management, and Buckingham Capital Management were also bullish on Dycom Industries, Inc. (NYSE:DY), allocating a large percentage of their portfolios to this stock.

Because Dycom Industries, Inc. (NYSE:DY) has experienced declining sentiment from the smart money, it’s easy to see that there lies a certain “tier” of money managers that slashed their full holdings last quarter. Interestingly, Ross Margolies’s Stelliam Investment Management dropped the largest investment of the 700 funds tracked by Insider Monkey, valued at about $44.3 million in stock. James Dinan’s fund, York Capital Management, also dropped its stock, about $40.7 million worth. These moves are interesting, as total hedge fund interest was cut by 3 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Dycom Industries, Inc. (NYSE:DY). These stocks are Acceleron Pharma Inc (NASDAQ:XLRN), Nextera Energy Partners LP (NYSE:NEP), Supernus Pharmaceuticals Inc (NASDAQ:SUPN), and AMC Entertainment Holdings Inc (NYSE:AMC). All of these stocks’ market caps are similar to DY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
XLRN 27 441031 3
NEP 12 56818 5
SUPN 14 59831 -3
AMC 21 159127 7
Average 18.5 179202 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $179 million. That figure was $212 million in DY’s case. Acceleron Pharma Inc (NASDAQ:XLRN) is the most popular stock in this table. On the other hand Nextera Energy Partners LP (NYSE:NEP) is the least popular one with only 12 bullish hedge fund positions. Dycom Industries, Inc. (NYSE:DY) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard XLRN might be a better candidate to consider a long position.

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

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