Hedge Funds Have Never Been This Bullish On Dorman Products Inc. (DORM)

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 Dorman Products Inc. (NASDAQ:DORM) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Is Dorman Products Inc. (NASDAQ:DORM) the right pick for your portfolio? The best stock pickers were becoming hopeful. The number of bullish hedge fund bets rose by 5 in recent months. Dorman Products Inc. (NASDAQ:DORM) was in 19 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 15. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that DORM 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). There were 14 hedge funds in our database with DORM holdings at the end of March.

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 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.

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

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 take a peek at the key hedge fund action surrounding Dorman Products Inc. (NASDAQ:DORM).

What have hedge funds been doing with Dorman Products Inc. (NASDAQ:DORM)?

At second quarter’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 36% from the first quarter of 2020. By comparison, 14 hedge funds held shares or bullish call options in DORM a year ago. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Is DORM A Good Stock To Buy?

The largest stake in Dorman Products Inc. (NASDAQ:DORM) was held by Royce & Associates, which reported holding $21.3 million worth of stock at the end of September. It was followed by Marshall Wace LLP with a $11.9 million position. Other investors bullish on the company included Citadel Investment Group, Intrinsic Edge Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Minerva Advisors allocated the biggest weight to Dorman Products Inc. (NASDAQ:DORM), around 1.13% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, setting aside 0.88 percent of its 13F equity portfolio to DORM.

Now, some big names have been driving this bullishness. Intrinsic Edge Capital, managed by Mark Coe, assembled the largest position in Dorman Products Inc. (NASDAQ:DORM). Intrinsic Edge Capital had $6.4 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $3.5 million position during the quarter. The following funds were also among the new DORM investors: Michael Gelband’s ExodusPoint Capital, Greg Eisner’s Engineers Gate Manager, and Mika Toikka’s AlphaCrest Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to Dorman Products Inc. (NASDAQ:DORM). We will take a look at ExlService Holdings, Inc. (NASDAQ:EXLS), Evoqua Water Technologies Corp. (NYSE:AQUA), John Wiley & Sons Inc (NYSE:JW), TeleTech Holdings, Inc. (NASDAQ:TTEC), Cal-Maine Foods Inc (NASDAQ:CALM), Ingevity Corporation (NYSE:NGVT), and SAGE Therapeutics Inc (NASDAQ:SAGE). This group of stocks’ market values resemble DORM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EXLS 12 50570 -3
AQUA 17 185631 -11
JW 16 34618 -1
TTEC 12 37051 -3
CALM 15 181480 -11
NGVT 31 240105 2
SAGE 30 463639 0
Average 19 170442 -3.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $170 million. That figure was $73 million in DORM’s case. Ingevity Corporation (NYSE:NGVT) is the most popular stock in this table. On the other hand ExlService Holdings, Inc. (NASDAQ:EXLS) is the least popular one with only 12 bullish hedge fund positions. Dorman Products Inc. (NASDAQ:DORM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DORM is 58.4. 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 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. A small number of hedge funds were also right about betting on DORM as the stock returned 34.8% in the third quarter and outperformed the market by an even larger margin.

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