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 Destination XL Group Inc (NASDAQ:DXLG) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is Destination XL Group (DXLG) a good stock to buy now? Money managers were cutting their exposure. The number of long hedge fund positions were cut by 1 in recent months. Destination XL Group Inc (NASDAQ:DXLG) was in 6 hedge funds’ portfolios at the end of September. The all time high for this statistics is 13. Our calculations also showed that DXLG 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). There were 7 hedge funds in our database with DXLG positions at the end of the second quarter.
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. Now we’re going to take a glance at the key hedge fund action encompassing Destination XL Group Inc (NASDAQ:DXLG).
How have hedgies been trading Destination XL Group Inc (NASDAQ:DXLG)?
Heading into the fourth quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from one quarter earlier. On the other hand, there were a total of 6 hedge funds with a bullish position in DXLG a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Red Mountain Capital held the most valuable stake in Destination XL Group Inc (NASDAQ:DXLG), which was worth $2.2 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $0.7 million worth of shares. Prescott Group Capital Management, Millennium Management, and Royce & Associates 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 Red Mountain Capital allocated the biggest weight to Destination XL Group Inc (NASDAQ:DXLG), around 3.92% of its 13F portfolio. Prescott Group Capital Management is also relatively very bullish on the stock, designating 0.15 percent of its 13F equity portfolio to DXLG.
Due to the fact that Destination XL Group Inc (NASDAQ:DXLG) has faced bearish sentiment from the smart money, it’s safe to say that there lies a certain “tier” of funds that decided to sell off their positions entirely heading into Q4. Intriguingly, J. Carlo Cannell’s Cannell Capital said goodbye to the biggest stake of the 750 funds tracked by Insider Monkey, worth about $2.3 million in stock, and Jim Roumell’s Roumell Asset Management was right behind this move, as the fund sold off about $0.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 1 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Destination XL Group Inc (NASDAQ:DXLG) but similarly valued. We will take a look at Predictive Oncology Inc. (NASDAQ:POAI), Trio-Tech International (NYSE:TRT), Independence Contract Drilling Inc (NYSE:ICD), Nortech Systems Incorporated (NASDAQ:NSYS), Phio Pharmaceuticals Corp. (NASDAQ:PHIO), Supercom Ltd (NASDAQ:SPCB), and Professional Diversity Network, Inc. (NASDAQ:IPDN). This group of stocks’ market valuations match DXLG’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 2 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $3 million in DXLG’s case. Supercom Ltd (NASDAQ:SPCB) is the most popular stock in this table. On the other hand Predictive Oncology Inc. (NASDAQ:POAI) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Destination XL Group Inc (NASDAQ:DXLG) is more popular among hedge funds. Our overall hedge fund sentiment score for DXLG is 67.8. 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 30.7% in 2020 through November 27th but still managed to beat the market by 16.1 percentage points. Hedge funds were also right about betting on DXLG as the stock returned 53.8% since the end of September (through 11/27) 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.
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Disclosure: None. This article was originally published at Insider Monkey.