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Hedge Funds Are Piling Into Dicks Sporting Goods Inc (DKS)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Dicks Sporting Goods Inc (NYSE:DKS) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Dicks Sporting Goods Inc (NYSE:DKS) shareholders have witnessed an increase in enthusiasm from smart money of late. Dicks Sporting Goods Inc (NYSE:DKS) was in 40 hedge funds’ portfolios at the end of June. The all time high for this statistics is 44. There were 27 hedge funds in our database with DKS holdings at the end of March. Our calculations also showed that DKS isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Clint Carlson of Carlson Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s view the new hedge fund action surrounding Dicks Sporting Goods Inc (NYSE:DKS).

How are hedge funds trading Dicks Sporting Goods Inc (NYSE:DKS)?

At the end of June, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 48% from the previous quarter. By comparison, 23 hedge funds held shares or bullish call options in DKS a year ago. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

More specifically, Scopus Asset Management was the largest shareholder of Dicks Sporting Goods Inc (NYSE:DKS), with a stake worth $68.1 million reported as of the end of September. Trailing Scopus Asset Management was Balyasny Asset Management, which amassed a stake valued at $57.1 million. Citadel Investment Group, Millennium Management, and Tensile Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Tensile Capital allocated the biggest weight to Dicks Sporting Goods Inc (NYSE:DKS), around 5.87% of its 13F portfolio. Pacifica Capital Investments is also relatively very bullish on the stock, dishing out 2.51 percent of its 13F equity portfolio to DKS.

With a general bullishness amongst the heavyweights, key money managers have jumped into Dicks Sporting Goods Inc (NYSE:DKS) headfirst. Moore Global Investments, managed by Louis Bacon, initiated the most valuable position in Dicks Sporting Goods Inc (NYSE:DKS). Moore Global Investments had $15.1 million invested in the company at the end of the quarter. George McCabe’s Portolan Capital Management also made a $13.6 million investment in the stock during the quarter. The following funds were also among the new DKS investors: Anand Parekh’s Alyeska Investment Group, Clint Carlson’s Carlson Capital, and Robert Pohly’s Samlyn Capital.

Let’s now take a look at hedge fund activity in other stocks similar to Dicks Sporting Goods Inc (NYSE:DKS). These stocks are Ultrapar Participacoes SA (NYSE:UGP), RLI Corp. (NYSE:RLI), Agios Pharmaceuticals Inc (NASDAQ:AGIO), Tapestry, Inc. (NYSE:TPR), Simpson Manufacturing Co, Inc. (NYSE:SSD), Alamos Gold Inc (NYSE:AGI), and DouYu International Holdings Limited (NASDAQ:DOYU). This group of stocks’ market valuations are closest to DKS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UGP 7 38733 2
RLI 20 160243 5
AGIO 30 460464 7
TPR 39 533337 2
SSD 21 200223 -5
AGI 16 399028 -3
DOYU 15 77638 0
Average 21.1 267095 1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $267 million. That figure was $493 million in DKS’s case. Tapestry, Inc. (NYSE:TPR) is the most popular stock in this table. On the other hand Ultrapar Participacoes SA (NYSE:UGP) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Dicks Sporting Goods Inc (NYSE:DKS) is more popular among hedge funds. Our overall hedge fund sentiment score for DKS is 87.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 returned 33% in 2020 through the end of August but still managed to beat the market by 23.2 percentage points. Hedge funds were also right about betting on DKS as the stock returned 31.2% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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