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Hedge Funds Souring On Dawson Geophysical Company (DWSN)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Dawson Geophysical Company (NASDAQ:DWSN).

Dawson Geophysical Company (NASDAQ:DWSN) was in 6 hedge funds’ portfolios at the end of the first quarter of 2020. DWSN investors should pay attention to a decrease in activity from the world’s largest hedge funds lately. There were 7 hedge funds in our database with DWSN positions at the end of the previous quarter. Our calculations also showed that DWSN 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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.

Fred DiSanto Ancora Advisors

Fred DiSanto of Ancora Advisors

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 stocks recommended/scorned by legendary Bill Miller. 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 review the latest hedge fund action encompassing Dawson Geophysical Company (NASDAQ:DWSN).

What have hedge funds been doing with Dawson Geophysical Company (NASDAQ:DWSN)?

Heading into the second quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the fourth quarter of 2019. By comparison, 8 hedge funds held shares or bullish call options in DWSN a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the biggest position in Dawson Geophysical Company (NASDAQ:DWSN), worth close to $1.6 million, amounting to less than 0.1%% of its total 13F portfolio. On Renaissance Technologies’s heels is Minerva Advisors, managed by David P. Cohen, which holds a $0.4 million position; 0.3% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions comprise Frederick DiSanto’s Ancora Advisors, Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners and Chuck Royce’s Royce & Associates. In terms of the portfolio weights assigned to each position Minerva Advisors allocated the biggest weight to Dawson Geophysical Company (NASDAQ:DWSN), around 0.3% of its 13F portfolio. GRT Capital Partners is also relatively very bullish on the stock, setting aside 0.13 percent of its 13F equity portfolio to DWSN.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified DWSN as a viable investment and initiated a position in the stock.

Let’s now review hedge fund activity in other stocks similar to Dawson Geophysical Company (NASDAQ:DWSN). We will take a look at Cinedigm Corp (NASDAQ:CIDM), ProPhase Labs Inc (NASDAQ:PRPH), Reed’s, Inc. (NASDAQ:REED), and The L.S. Starrett Company (NYSE:SCX). This group of stocks’ market caps match DWSN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CIDM 1 375 -1
PRPH 1 368 0
REED 6 744 2
SCX 4 2952 0
Average 3 1110 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 3 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $2 million in DWSN’s case. Reed’s, Inc. (NASDAQ:REED) is the most popular stock in this table. On the other hand Cinedigm Corp (NASDAQ:CIDM) is the least popular one with only 1 bullish hedge fund positions. Dawson Geophysical Company (NASDAQ:DWSN) 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 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on DWSN as the stock returned 84.5% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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