Hedge Funds Are Buying Donegal Group Inc (DGICA)

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Donegal Group Inc (NASDAQ:DGICA) in this article.

Is Donegal Group Inc (NASDAQ:DGICA) a splendid investment today? Investors who are in the know are getting more bullish. The number of bullish hedge fund positions increased by 2 recently. Our calculations also showed that DGICA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). DGICA was in 6 hedge funds’ portfolios at the end of the third quarter of 2019. There were 4 hedge funds in our database with DGICA positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are several methods market participants can use to analyze stocks. Some of the best methods are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the elite hedge fund managers can trounce their index-focused peers by a superb margin (see the details here).


Jim Simons of Renaissance Technologies

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to take a gander at the new hedge fund action surrounding Donegal Group Inc (NASDAQ:DGICA).

How have hedgies been trading Donegal Group Inc (NASDAQ:DGICA)?

At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the second quarter of 2019. By comparison, 5 hedge funds held shares or bullish call options in DGICA a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

Is DGICA A Good Stock To Buy?

The largest stake in Donegal Group Inc (NASDAQ:DGICA) was held by Renaissance Technologies, which reported holding $8.8 million worth of stock at the end of September. It was followed by Winton Capital Management with a $0.5 million position. Other investors bullish on the company included Citadel Investment Group, Minerva Advisors, and Millennium Management. In terms of the portfolio weights assigned to each position Minerva Advisors allocated the biggest weight to Donegal Group Inc (NASDAQ:DGICA), around 0.22% 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.

Now, some big names have been driving this bullishness. Winton Capital Management, managed by David Harding, established the most outsized position in Donegal Group Inc (NASDAQ:DGICA). Winton Capital Management had $0.5 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.4 million investment in the stock during the quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Donegal Group Inc (NASDAQ:DGICA) but similarly valued. These stocks are Puma Biotechnology Inc (NYSE:PBYI), Prevail Therapeutics Inc. (NASDAQ:PRVL), Rosetta Stone Inc (NYSE:RST), and Equity Bancshares, Inc. (NASDAQ:EQBK). This group of stocks’ market caps match DGICA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PBYI 17 120368 0
PRVL 9 270707 -2
RST 15 79812 3
EQBK 6 41823 1
Average 11.75 128178 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $128 million. That figure was $11 million in DGICA’s case. Puma Biotechnology Inc (NYSE:PBYI) is the most popular stock in this table. On the other hand Equity Bancshares, Inc. (NASDAQ:EQBK) 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 EQBK. Hedge funds dodged a bullet by taking a bearish stance towards DGICA. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately DGICA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); DGICA investors were disappointed as the stock returned 0.8% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.

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