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Hedge Funds Aren’t Crazy About Diamond Hill Investment Group, Inc. (DHIL) Anymore

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) based on that data and determine whether they were really smart about the stock.

Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) investors should pay attention to a decrease in activity from the world’s largest hedge funds in recent months. DHIL was in 11 hedge funds’ portfolios at the end of March. There were 14 hedge funds in our database with DHIL holdings at the end of the previous quarter. Our calculations also showed that DHIL isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

To most shareholders, hedge funds are perceived as slow, outdated financial tools of the past. While there are over 8000 funds with their doors open at present, We choose to focus on the bigwigs of this group, around 850 funds. These investment experts have their hands on the lion’s share of the hedge fund industry’s total capital, and by monitoring their matchless investments, Insider Monkey has revealed a number of investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

AQR CAPITAL MANAGEMENT

Cliff Asness of AQR Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s go over the key hedge fund action surrounding Diamond Hill Investment Group, Inc. (NASDAQ:DHIL).

What does smart money think about Diamond Hill Investment Group, Inc. (NASDAQ:DHIL)?

At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from the fourth quarter of 2019. On the other hand, there were a total of 9 hedge funds with a bullish position in DHIL a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Renaissance Technologies has the most valuable position in Diamond Hill Investment Group, Inc. (NASDAQ:DHIL), worth close to $13.2 million, comprising less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Chuck Royce of Royce & Associates, with a $3.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish include Cliff Asness’s AQR Capital Management, Ali Motamed’s Invenomic Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Osmium Partners allocated the biggest weight to Diamond Hill Investment Group, Inc. (NASDAQ:DHIL), around 1.44% of its 13F portfolio. Invenomic Capital Management is also relatively very bullish on the stock, earmarking 1.16 percent of its 13F equity portfolio to DHIL.

Because Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there exists a select few funds that decided to sell off their entire stakes last quarter. Intriguingly, Matthew Hulsizer’s PEAK6 Capital Management cut the biggest investment of all the hedgies followed by Insider Monkey, totaling an estimated $2.5 million in stock. Israel Englander’s fund, Millennium Management, also dropped its stock, about $0.6 million worth. These moves are important to note, as total hedge fund interest was cut by 3 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Diamond Hill Investment Group, Inc. (NASDAQ:DHIL). We will take a look at Dynavax Technologies Corporation (NASDAQ:DVAX), Ituran Location and Control Ltd. (NASDAQ:ITRN), Gamco Investors Inc. (NYSE:GBL), and Sprague Resources LP (NYSE:SRLP). All of these stocks’ market caps are similar to DHIL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DVAX 8 19065 -5
ITRN 10 44551 0
GBL 9 4523 0
SRLP 4 18879 1
Average 7.75 21755 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $22 million. That figure was $25 million in DHIL’s case. Ituran Location and Control Ltd. (NASDAQ:ITRN) is the most popular stock in this table. On the other hand Sprague Resources LP (NYSE:SRLP) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) is more popular among hedge funds. 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 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on DHIL as the stock returned 26% in Q2 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.