Hedge Funds Can’t Have Enough Of Dunkin Brands Group Inc (DNKN)

In this article we will check out the progression of hedge fund sentiment towards Dunkin Brands Group Inc (NASDAQ:DNKN) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is Dunkin Brands Group Inc (NASDAQ:DNKN) the right investment to pursue these days? Hedge funds are becoming more confident. The number of bullish hedge fund bets rose by 3 in recent months. Our calculations also showed that DNKN 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 51 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Louis Bacon Moore of Moore Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a gander at the new hedge fund action encompassing Dunkin Brands Group Inc (NASDAQ:DNKN).

How are hedge funds trading Dunkin Brands Group Inc (NASDAQ:DNKN)?

Heading into the second quarter of 2020, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from one quarter earlier. On the other hand, there were a total of 22 hedge funds with a bullish position in DNKN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Two Sigma Advisors held the most valuable stake in Dunkin Brands Group Inc (NASDAQ:DNKN), which was worth $51.4 million at the end of the third quarter. On the second spot was Millennium Management which amassed $23.4 million worth of shares. Citadel Investment Group, Marshall Wace LLP, and Renaissance Technologies 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 Solel Partners allocated the biggest weight to Dunkin Brands Group Inc (NASDAQ:DNKN), around 5.78% of its 13F portfolio. Waratah Capital Advisors is also relatively very bullish on the stock, earmarking 0.87 percent of its 13F equity portfolio to DNKN.

As aggregate interest increased, key money managers were leading the bulls’ herd. Moore Global Investments, managed by Louis Bacon, assembled the biggest position in Dunkin Brands Group Inc (NASDAQ:DNKN). Moore Global Investments had $14.4 million invested in the company at the end of the quarter. Craig Peskin and Peter Fleiss’s Solel Partners also initiated a $11.8 million position during the quarter. The other funds with brand new DNKN positions are Dmitry Balyasny’s Balyasny Asset Management, Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors, and Brett Barakett’s Tremblant Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Dunkin Brands Group Inc (NASDAQ:DNKN) but similarly valued. We will take a look at New York Community Bancorp, Inc. (NYSE:NYCB), CoreSite Realty Corp (NYSE:COR), Chegg Inc (NYSE:CHGG), and Robert Half International Inc. (NYSE:RHI). This group of stocks’ market caps are closest to DNKN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NYCB 22 192830 -5
COR 23 267395 2
CHGG 34 302599 -5
RHI 26 247265 3
Average 26.25 252522 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $253 million. That figure was $207 million in DNKN’s case. Chegg Inc (NYSE:CHGG) is the most popular stock in this table. On the other hand New York Community Bancorp, Inc. (NYSE:NYCB) is the least popular one with only 22 bullish hedge fund positions. Dunkin Brands Group Inc (NASDAQ:DNKN) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on DNKN, though not to the same extent, as the stock returned 20.3% during the first two months of the second quarter and outperformed the market as well.

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