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 DHI Group Inc. (NYSE:DHX) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is DHI a good stock to buy now? DHI Group Inc. (NYSE:DHX) was in 11 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 21. DHX shareholders have witnessed a decrease in support from the world’s most elite money managers of late. There were 14 hedge funds in our database with DHX positions at the end of the second quarter. Our calculations also showed that DHX 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was 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’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.
Wil Harkey of Nantahala Capital Management
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 peek at the recent hedge fund action surrounding DHI Group Inc. (NYSE:DHX).
Do Hedge Funds Think DHX Is A Good Stock To Buy Now?
At the end of September, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from the second quarter of 2020. On the other hand, there were a total of 17 hedge funds with a bullish position in DHX a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Nantahala Capital Management, managed by Wilmot B. Harkey and Daniel Mack, holds the largest position in DHI Group Inc. (NYSE:DHX). Nantahala Capital Management has a $10.9 million position in the stock, comprising 0.3% of its 13F portfolio. The second most bullish fund manager is Archon Capital Management, led by Constantinos J. Christofilis, holding a $8.5 million position; 1.7% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism contain Renaissance Technologies, D. E. Shaw’s D E Shaw and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Archon Capital Management allocated the biggest weight to DHI Group Inc. (NYSE:DHX), around 1.72% of its 13F portfolio. Nantahala Capital Management is also relatively very bullish on the stock, earmarking 0.33 percent of its 13F equity portfolio to DHX.
Since DHI Group Inc. (NYSE:DHX) has experienced bearish sentiment from the smart money, it’s safe to say that there exists a select few hedge funds who were dropping their full holdings last quarter. Interestingly, Ken Griffin’s Citadel Investment Group cut the biggest stake of the “upper crust” of funds tracked by Insider Monkey, totaling close to $0.2 million in stock, and Peter Muller’s PDT Partners was right behind this move, as the fund dumped about $0 million worth. These transactions are important to note, as total hedge fund interest was cut by 3 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as DHI Group Inc. (NYSE:DHX) but similarly valued. These stocks are Saga Communications, Inc. (NASDAQ:SGA), Aviat Networks Inc (NASDAQ:AVNW), ObsEva SA (NASDAQ:OBSV), County Bancorp, Inc. (NASDAQ:ICBK), Ardmore Shipping Corp (NYSE:ASC), Catabasis Pharmaceuticals Inc (NASDAQ:CATB), and LEAP THERAPEUTICS, INC. (NASDAQ:LPTX). This group of stocks’ market valuations match DHX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SGA | 3 | 10874 | 0 |
| AVNW | 5 | 27577 | 0 |
| OBSV | 6 | 17950 | -5 |
| ICBK | 3 | 3672 | -1 |
| ASC | 12 | 12907 | 0 |
| CATB | 6 | 3401 | -2 |
| LPTX | 12 | 34432 | -4 |
| Average | 6.7 | 15830 | -1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.7 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $31 million in DHX’s case. Ardmore Shipping Corp (NYSE:ASC) is the most popular stock in this table. On the other hand Saga Communications, Inc. (NASDAQ:SGA) is the least popular one with only 3 bullish hedge fund positions. DHI Group Inc. (NYSE:DHX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DHX is 62.2. 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. This is a slightly positive signal but 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 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 beat the market again by 16.2 percentage points. Unfortunately DHX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on DHX were disappointed as the stock returned -2.7% since the end of September (through 12/8) 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
