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 Dunkin Brands Group Inc (NASDAQ:DNKN) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Is Dunkin Brands Group Inc (NASDAQ:DNKN) undervalued? Investors who are in the know were buying. The number of long hedge fund bets rose by 1 in recent months. Dunkin Brands Group Inc (NASDAQ:DNKN) was in 35 hedge funds’ portfolios at the end of June. The all time high for this statistics is 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that DNKN 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. 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. Keeping this in mind we’re going to view the recent hedge fund action regarding Dunkin Brands Group Inc (NASDAQ:DNKN).
How are hedge funds trading Dunkin Brands Group Inc (NASDAQ:DNKN)?
Heading into the third quarter of 2020, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DNKN over the last 20 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Dunkin Brands Group Inc (NASDAQ:DNKN), with a stake worth $139.5 million reported as of the end of September. Trailing Citadel Investment Group was Melvin Capital Management, which amassed a stake valued at $65.2 million. Two Sigma Advisors, Junto Capital Management, and Arrowstreet 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 MIK Capital allocated the biggest weight to Dunkin Brands Group Inc (NASDAQ:DNKN), around 3.5% of its 13F portfolio. Junto Capital Management is also relatively very bullish on the stock, designating 1.88 percent of its 13F equity portfolio to DNKN.
As industrywide interest jumped, key money managers have been driving this bullishness. Melvin Capital Management, managed by Gabriel Plotkin, established the biggest position in Dunkin Brands Group Inc (NASDAQ:DNKN). Melvin Capital Management had $65.2 million invested in the company at the end of the quarter. James Parsons’s Junto Capital Management also made a $43.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Leon Shaulov’s Maplelane Capital, and Kamyar Khajavi’s MIK 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 First American Financial Corp (NYSE:FAF), Jones Lang LaSalle Inc (NYSE:JLL), Woori Financial Group Inc. (NYSE:WF), Corelogic Inc (NYSE:CLGX), Columbia Sportswear Company (NASDAQ:COLM), United Therapeutics Corporation (NASDAQ:UTHR), and Levi Strauss & Co. (NYSE:LEVI). This group of stocks’ market valuations are closest to DNKN’s market valuation.
|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 25.9 hedge funds with bullish positions and the average amount invested in these stocks was $524 million. That figure was $417 million in DNKN’s case. First American Financial Corp (NYSE:FAF) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 5 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 overall hedge fund sentiment score for DNKN is 74.5. 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 gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on DNKN, though not to the same extent, as the stock returned 17.2% since the end of June and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.