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. We have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Daktronics, Inc. (NASDAQ:DAKT) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is DAKT a good stock to buy now? Hedge fund interest in Daktronics, Inc. (NASDAQ:DAKT) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that DAKT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). 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 Titan International Inc (NYSE:TWI), NeuBase Therapeutics, Inc. (NASDAQ:NBSE), and Precision Drilling Corp (NYSE:PDS) to gather more data points.
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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to take a glance at the latest hedge fund action regarding Daktronics, Inc. (NASDAQ:DAKT).
Do Hedge Funds Think DAKT Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2020. On the other hand, there were a total of 15 hedge funds with a bullish position in DAKT a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the largest position in Daktronics, Inc. (NASDAQ:DAKT). Renaissance Technologies has a $5.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is D. E. Shaw of D E Shaw, with a $1.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Israel Englander’s Millennium Management and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Daktronics, Inc. (NASDAQ:DAKT), around 0.12% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to DAKT.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: 999. 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 only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Marshall Wace LLP).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Daktronics, Inc. (NASDAQ:DAKT) but similarly valued. These stocks are Titan International Inc (NYSE:TWI), NeuBase Therapeutics, Inc. (NASDAQ:NBSE), Precision Drilling Corp (NYSE:PDS), Carter Bank & Trust (NASDAQ:CARE), Scorpio Bulkers Inc (NYSE:SALT), TD Holdings, Inc. (NASDAQ:GLG), and PowerFleet, Inc. (NASDAQ:PWFL). This group of stocks’ market valuations resemble DAKT’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.3 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $13 million in DAKT’s case. Titan International Inc (NYSE:TWI) is the most popular stock in this table. On the other hand Scorpio Bulkers Inc (NYSE:SALT) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Daktronics, Inc. (NASDAQ:DAKT) is more popular among hedge funds. Our overall hedge fund sentiment score for DAKT is 81.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 32.9% in 2020 through December 8th but still managed to beat the market by 16.2 percentage points. Hedge funds were also right about betting on DAKT as the stock returned 17.2% since the end of September (through 12/8) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.