We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like DSP Group, Inc. (NASDAQ:DSPG).
Is DSP Group, Inc. (NASDAQ:DSPG) a healthy stock for your portfolio? The best stock pickers are getting more optimistic. The number of long hedge fund bets increased by 2 in recent months. Our calculations also showed that DSPG isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s check out the fresh hedge fund action encompassing DSP Group, Inc. (NASDAQ:DSPG).
What does smart money think about DSP Group, Inc. (NASDAQ:DSPG)?
At Q2’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in DSPG over the last 16 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, Rima Senvest Management was the largest shareholder of DSP Group, Inc. (NASDAQ:DSPG), with a stake worth $16.9 million reported as of the end of March. Trailing Rima Senvest Management was Renaissance Technologies, which amassed a stake valued at $16.4 million. Raging Capital Management, Lynrock Lake, and Arrowstreet Capital were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, key money managers were breaking ground themselves. Algert Coldiron Investors, managed by Peter Algert and Kevin Coldiron, established the largest position in DSP Group, Inc. (NASDAQ:DSPG). Algert Coldiron Investors had $0.3 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also made a $0.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management and Benjamin A. Smith’s Laurion Capital Management.
Let’s also examine hedge fund activity in other stocks similar to DSP Group, Inc. (NASDAQ:DSPG). We will take a look at On Deck Capital Inc (NYSE:ONDK), USD Partners LP (NYSE:USDP), Denison Mines Corp (NYSE:DNN), and Spirit of Texas Bancshares, Inc. (NASDAQ:STXB). This group of stocks’ market caps match DSPG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ONDK | 18 | 91532 | -1 |
| USDP | 3 | 4457 | -1 |
| DNN | 4 | 1703 | 0 |
| STXB | 1 | 580 | 0 |
| Average | 6.5 | 24568 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $61 million in DSPG’s case. On Deck Capital Inc (NYSE:ONDK) is the most popular stock in this table. On the other hand Spirit of Texas Bancshares, Inc. (NASDAQ:STXB) is the least popular one with only 1 bullish hedge fund positions. DSP Group, Inc. (NASDAQ:DSPG) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately DSPG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on DSPG were disappointed as the stock returned -1.9% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
