Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.
Is Dorian LPG Ltd (NYSE:LPG) a great investment now? Money managers are surely getting less bullish. The number of long hedge fund bets that are revealed through 13F filings was slashed by 2 in recent months. LPG was in 8 hedge funds’ portfolios at the end of September. There were 10 hedge funds in our database with LPG holdings at the end of June. 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 UMH Properties, Inc (NYSE:UMH), BioScrip Inc. (NASDAQ:BIOS), and Supreme Industries, Inc. (NYSEAMEX:STS) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
How are hedge funds trading Dorian LPG Ltd (NYSE:LPG)?
At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 20% dip from the previous quarter. There were a total of 10 hedge funds with a bullish position in LPG at the beginning of this year, so hedge fund ownership is also down by 20% in 2016. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Michael Lowenstein’s Kensico Capital has the number one position in Dorian LPG Ltd (NYSE:LPG), worth close to $48.1 million. Coming in second is Dalton Investments, led by Gifford Combs, holding a $6.4 million position; the fund has 2.6% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions contain Chuck Royce’s Royce & Associates, Jim Simons’ Renaissance Technologies, and Roger Ibbotson’s Zebra Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-micro-cap stocks.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that sold off their entire stakes in the stock during the third quarter. At the top of the heap, Paul Orlin and Alex Porter’s Amici Capital sold off the biggest stake of all the hedgies studied by Insider Monkey, valued at about $2.1 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $0.7 million worth of shares.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Dorian LPG Ltd (NYSE:LPG) but similarly valued. We will take a look at UMH Properties, Inc (NYSE:UMH), BioScrip Inc. (NASDAQ:BIOS), Supreme Industries, Inc. (NYSEAMEX:STS), and Renewable Energy Group Inc (NASDAQ:REGI). This group of stocks’ market valuations resemble LPG’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $57 million in LPG’s case. BioScrip Inc. (NASDAQ:BIOS) is the most popular stock in this table. On the other hand UMH Properties, Inc (NYSE:UMH) is the least popular one with only 5 bullish hedge fund positions. Dorian LPG Ltd (NYSE:LPG) 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. In this regard BIOS might be a better candidate to consider taking a long position in.