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Hedge Funds In Wait And See Mode With DSP Group, Inc. (DSPG)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of DSP Group, Inc. (NASDAQ:DSPG).

DSP Group, Inc. (NASDAQ:DSPG) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds’ portfolios at the end of the first quarter of 2020. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Enterprise Bancorp, Inc (NASDAQ:EBTC), Precision BioSciences, Inc. (NASDAQ:DTIL), and Tufin Software Technologies Ltd. (NYSE:TUFN) to gather more data points. Our calculations also showed that DSPG 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.

If you’d ask most investors, hedge funds are perceived as slow, old investment vehicles of yesteryear. While there are more than 8000 funds with their doors open at the moment, Our experts choose to focus on the leaders of this group, approximately 850 funds. Most estimates calculate that this group of people watch over most of the hedge fund industry’s total asset base, and by keeping an eye on their top stock picks, Insider Monkey has formulated many investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually 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 .

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Keeping this in mind we’re going to go over the fresh hedge fund action surrounding DSP Group, Inc. (NASDAQ:DSPG).

Hedge fund activity in DSP Group, Inc. (NASDAQ:DSPG)

At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DSPG over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings 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 $24.2 million reported as of the end of September. Trailing Rima Senvest Management was Renaissance Technologies, which amassed a stake valued at $13.3 million. Lynrock Lake, D E Shaw, and Two Sigma Advisors 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 Rima Senvest Management allocated the biggest weight to DSP Group, Inc. (NASDAQ:DSPG), around 2.84% of its 13F portfolio. Lynrock Lake is also relatively very bullish on the stock, setting aside 0.82 percent of its 13F equity portfolio to DSPG.

Due to the fact that DSP Group, Inc. (NASDAQ:DSPG) has experienced falling interest from the smart money, we can see that there lies a certain “tier” of funds who were dropping their full holdings by the end of the first quarter. Interestingly, Minhua Zhang’s Weld Capital Management dumped the largest position of the “upper crust” of funds watched by Insider Monkey, worth close to $0.5 million in stock. Peter Muller’s fund, PDT Partners, also dumped its stock, about $0.3 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to DSP Group, Inc. (NASDAQ:DSPG). We will take a look at Enterprise Bancorp, Inc (NASDAQ:EBTC), Precision BioSciences, Inc. (NASDAQ:DTIL), Tufin Software Technologies Ltd. (NYSE:TUFN), and Talos Energy, Inc. (NYSE:TALO). All of these stocks’ market caps match DSPG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EBTC 1 1517 -3
DTIL 11 9639 1
TUFN 5 3312 -3
TALO 9 15414 -5
Average 6.5 7471 -2.5

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 $7 million. That figure was $54 million in DSPG’s case. Precision BioSciences, Inc. (NASDAQ:DTIL) is the most popular stock in this table. On the other hand Enterprise Bancorp, Inc (NASDAQ:EBTC) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks DSP Group, Inc. (NASDAQ:DSPG) 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 gained 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. Unfortunately DSPG wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on DSPG were disappointed as the stock returned 16% during the second quarter (through June 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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