There is no doubt that re-balancing represents a key part of portfolio management, as hedge fund managers and other investors have to constantly adjust their holdings so as to maintain a specific level of risk exposure. The recent market volatility and sell-off in most U.S equities has surely pushed some hedge fund investors to undergo just such a re-balancing of their portfolios as a result. Having that in mind, the following article will discuss the moves made by several hedge funds tracked by Insider Monkey on some of their most bullish positions. At the same time, we will take a quick look at the broader hedge fund sentiment on each of the stocks discussed so as to get an idea of whether the smart money industry believes as much in the future prospects of these companies as the following investors do.
In a newly-amended 13G filing with the SEC, Canyon Capital Advisors, founded by Joshua S. Friedman and Mitchell R. Julis, reported an ownership stake of 5.95 million shares in DHT Holdings Inc. (NYSE:DHT), which includes nearly 3.36 million shares due to convertible bond holdings. The 13F filing for the June quarter submitted by the investment firm disclosed a stake of 4.53 million shares, which did not include the aforementioned convertible bonds, which means the fund disposed of about 1.94 million shares. The shares of the operator of crude oil tankers in Bermuda are 11% in the green year-to-date, thanks to the recovering Crude (DBO) tanker rates, which may have prompted the sale. In fact, the Baltic Dirty Tanker Index, which tracks the rates of transporting crude in tankers, has climbed well above 700 points since the end of September, after dropping below the 600 level at the end of August. In the meantime, there were 33 hedge funds monitored by our team with stakes in DHT Holdings Inc. (NYSE:DHT) at the end of the second quarter, compared to 40 registered at the end of the prior one. Similarly, the value of their holdings decreased to $294.11 million from $346.89 million. Most importantly, the hedge funds within our database accumulated 40.80% of the company’s shares on June 30. Christopher Pucillo’s Solus Alternative Asset Management represents one of the largest shareholders of DHT Holdings Inc. (NYSE:DHT) within our database, owning 5.62 million shares.
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Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research has shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return 102% over the last three years and outperformed the S&P 500 Index by 53 percentage points (see the details here).
We have two more filings to cover on the following page, including one involving a small restaurant chain.