We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards DHT Holdings Inc (NYSE:DHT) and determine whether hedge funds skillfully traded this stock.
Is DHT Holdings Inc (NYSE:DHT) the right investment to pursue these days? Hedge funds were in a bearish mood. The number of long hedge fund bets went down by 16 recently. DHT Holdings Inc (NYSE:DHT) was in 18 hedge funds’ portfolios at the end of June. The all time high for this statistics is 34. Our calculations also showed that DHT 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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 real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to analyze the new hedge fund action regarding DHT Holdings Inc (NYSE:DHT).
What have hedge funds been doing with DHT Holdings Inc (NYSE:DHT)?
At second quarter’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -47% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DHT over the last 20 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in DHT Holdings Inc (NYSE:DHT) was held by Renaissance Technologies, which reported holding $46.4 million worth of stock at the end of September. It was followed by GLG Partners with a $18.6 million position. Other investors bullish on the company included Hosking Partners, Arrowstreet Capital, and Odey Asset Management Group. In terms of the portfolio weights assigned to each position Odey Asset Management Group allocated the biggest weight to DHT Holdings Inc (NYSE:DHT), around 2.18% of its 13F portfolio. Firefly Value Partners is also relatively very bullish on the stock, designating 2.16 percent of its 13F equity portfolio to DHT.
Judging by the fact that DHT Holdings Inc (NYSE:DHT) has experienced falling interest from hedge fund managers, it’s easy to see that there was a specific group of fund managers that decided to sell off their entire stakes in the second quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group said goodbye to the biggest stake of the 750 funds tracked by Insider Monkey, worth about $28.8 million in stock, and Jacob Doft’s Highline Capital Management was right behind this move, as the fund dropped about $12.5 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 16 funds in the second quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as DHT Holdings Inc (NYSE:DHT) but similarly valued. We will take a look at Cellectis SA (NASDAQ:CLLS), Keros Therapeutics, Inc. (NASDAQ:KROS), Accel Entertainment, Inc. (NYSE:ACEL), AGM Group Holdings Inc. (NASDAQ:AGMH), Cincinnati Bell Inc. (NYSE:CBB), Scorpio Tankers Inc. (NYSE:STNG), and GoPro Inc (NASDAQ:GPRO). This group of stocks’ market values match DHT’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $103 million. That figure was $147 million in DHT’s case. Scorpio Tankers Inc. (NYSE:STNG) is the most popular stock in this table. On the other hand AGM Group Holdings Inc. (NASDAQ:AGMH) is the least popular one with only 1 bullish hedge fund positions. DHT Holdings Inc (NYSE:DHT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DHT is 54.9. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately DHT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on DHT were disappointed as the stock returned 9% in Q3 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.