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Donegal Group Inc (DGICA): Hedge Funds In Wait-and-See Mode

In this article we will check out the progression of hedge fund sentiment towards Donegal Group Inc (NASDAQ:DGICA) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Hedge fund interest in Donegal Group Inc (NASDAQ:DGICA) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare DGICA to other stocks including Mobileiron Inc (NASDAQ:MOBL), Arch Resources, Inc. (NYSE:ARCH), and CrossFirst Bankshares, Inc. (NASDAQ:CFB) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are a multitude of signals stock traders have at their disposal to analyze stocks. Two of the most useful signals are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the top hedge fund managers can outpace their index-focused peers by a healthy amount (see the details here).

Fred DiSanto Ancora Advisors

Fred DiSanto of Ancora Advisors

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. Keeping this in mind let’s check out the new hedge fund action surrounding Donegal Group Inc (NASDAQ:DGICA).

What does smart money think about Donegal Group Inc (NASDAQ:DGICA)?

Heading into the second quarter of 2020, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DGICA over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the number one position in Donegal Group Inc (NASDAQ:DGICA). Renaissance Technologies has a $9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Minerva Advisors, managed by David P. Cohen, which holds a $0.3 million position; 0.3% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions comprise David Harding’s Winton Capital Management, Ken Griffin’s Citadel Investment Group and Frederick DiSanto’s Ancora Advisors. In terms of the portfolio weights assigned to each position Minerva Advisors allocated the biggest weight to Donegal Group Inc (NASDAQ:DGICA), around 0.27% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to DGICA.

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 take a look at hedge fund activity in other stocks – not necessarily in the same industry as Donegal Group Inc (NASDAQ:DGICA) but similarly valued. We will take a look at Mobileiron Inc (NASDAQ:MOBL), Arch Resources, Inc. (NYSE:ARCH), CrossFirst Bankshares, Inc. (NASDAQ:CFB), and Kimball International Inc (NASDAQ:KBAL). This group of stocks’ market valuations are closest to DGICA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MOBL 15 110592 -3
ARCH 24 88620 -2
CFB 6 8848 0
KBAL 12 79326 0
Average 14.25 71847 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $10 million in DGICA’s case. Arch Resources, Inc. (NYSE:ARCH) is the most popular stock in this table. On the other hand CrossFirst Bankshares, Inc. (NASDAQ:CFB) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Donegal Group Inc (NASDAQ:DGICA) is even less popular than CFB. Hedge funds dodged a bullet by taking a bearish stance towards DGICA. 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 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately DGICA wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); DGICA investors were disappointed as the stock returned -5.3% during the second quarter (through the end of May) 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.