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 817 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th, 2020. What do these smart investors think about Ducommun Incorporated (NYSE:DCO)?
Is DCO a good stock to buy now? DCOhas seen an increase in support from the world’s most elite money managers recently. Ducommun Incorporated (NYSE:DCO) was in 9 hedge funds’ portfolios at the end of September. The all time high for this statistic is 13. There were 8 hedge funds in our database with DCO holdings at the end of June. Our calculations also showed that DCO 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. With all of this in mind let’s take a gander at the fresh hedge fund action surrounding Ducommun Incorporated (NYSE:DCO).
Do Hedge Funds Think DCO Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DCO over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Ducommun Incorporated (NYSE:DCO), which was worth $11.6 million at the end of the third quarter. On the second spot was GAMCO Investors which amassed $11.2 million worth of shares. Royce & Associates, Intrinsic Edge Capital, and Arrowstreet Capital 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 Intrinsic Edge Capital allocated the biggest weight to Ducommun Incorporated (NYSE:DCO), around 0.2% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, designating 0.12 percent of its 13F equity portfolio to DCO.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Intrinsic Edge Capital, managed by Mark Coe, assembled the most outsized position in Ducommun Incorporated (NYSE:DCO). Intrinsic Edge Capital had $3 million invested in the company at the end of the quarter. Jeffrey Bronchick’s Cove Street Capital also initiated a $0 million position during the quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Ducommun Incorporated (NYSE:DCO) but similarly valued. These stocks are Barings BDC, Inc. (NYSE:BBDC), Central Pacific Financial Corp. (NYSE:CPF), CHP Merger Corp. (NASDAQ:CHPM), Pzena Investment Management Inc (NYSE:PZN), Co-Diagnostics, Inc. (NASDAQ:CODX), Peoples Bancorp Inc. (NASDAQ:PEBO), and Heidrick & Struggles International, Inc. (NASDAQ:HSII). This group of stocks’ market valuations are similar to DCO’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 9.9 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $37 million in DCO’s case. CHP Merger Corp. (NASDAQ:CHPM) is the most popular stock in this table. On the other hand Pzena Investment Management Inc (NYSE:PZN) is the least popular one with only 4 bullish hedge fund positions. Ducommun Incorporated (NYSE:DCO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DCO is 47.6. 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 gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on DCO as the stock returned 67.6% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.