We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Daktronics, Inc. (NASDAQ:DAKT).
Is Daktronics, Inc. (NASDAQ:DAKT) a buy right now? Money managers are becoming less confident. The number of long hedge fund positions shrunk by 1 in recent months. Our calculations also showed that dakt isn’t among the 30 most popular stocks among hedge funds.
To most stock holders, hedge funds are assumed to be underperforming, outdated financial tools of the past. While there are over 8000 funds in operation at the moment, Our experts look at the leaders of this club, about 750 funds. These investment experts direct the majority of the hedge fund industry’s total asset base, and by tracking their inimitable equity investments, Insider Monkey has formulated a number of investment strategies that have historically defeated the market. Insider Monkey’s flagship hedge fund strategy beat the S&P 500 index by around 5 percentage points per annum since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).
Let’s take a gander at the fresh hedge fund action surrounding Daktronics, Inc. (NASDAQ:DAKT).
How have hedgies been trading Daktronics, Inc. (NASDAQ:DAKT)?
At the end of the first quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards DAKT over the last 15 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Daktronics, Inc. (NASDAQ:DAKT) was held by Renaissance Technologies, which reported holding $7 million worth of stock at the end of March. It was followed by D E Shaw with a $3.1 million position. Other investors bullish on the company included Arrowstreet Capital, Two Sigma Advisors, and GAMCO Investors.
Seeing as Daktronics, Inc. (NASDAQ:DAKT) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of hedge funds that slashed their full holdings by the end of the third quarter. It’s worth mentioning that Chuck Royce’s Royce & Associates dropped the largest stake of all the hedgies watched by Insider Monkey, totaling about $0.8 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $0.3 million worth. These transactions are interesting, as total hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Daktronics, Inc. (NASDAQ:DAKT). These stocks are BioLife Solutions, Inc. (NASDAQ:BLFS), RR Donnelley & Sons Company (NYSE:RRD), MidWestOne Financial Group, Inc. (NASDAQ:MOFG), and Adverum Biotechnologies, Inc. (NASDAQ:ADVM). This group of stocks’ market valuations are closest to DAKT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BLFS | 15 | 83044 | 3 |
| RRD | 14 | 21806 | -3 |
| MOFG | 6 | 19475 | 2 |
| ADVM | 12 | 52296 | -5 |
| Average | 11.75 | 44155 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $44 million. That figure was $15 million in DAKT’s case. BioLife Solutions, Inc. (NASDAQ:BLFS) is the most popular stock in this table. On the other hand MidWestOne Financial Group, Inc. (NASDAQ:MOFG) is the least popular one with only 6 bullish hedge fund positions. Daktronics, Inc. (NASDAQ:DAKT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately DAKT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); DAKT investors were disappointed as the stock returned -16.5% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
