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Is Dillard’s, Inc. (DDS) A Good Stock To Buy?

Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

Is Dillard’s, Inc. (NYSE:DDS) a healthy stock for your portfolio? Prominent investors are taking a bullish view. The number of bullish hedge fund positions rose by 2 in recent months. At the end of this article we will also compare DDS to other stocks including Kirby Corporation (NYSE:KEX), Atmel Corporation (NASDAQ:ATML), and Sovran Self Storage Inc (NYSE:SSS) to get a better sense of its popularity.

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With all of this in mind, let’s check out the fresh action encompassing Dillard’s, Inc. (NYSE:DDS).

What have hedge funds been doing with Dillard’s, Inc. (NYSE:DDS)?

At Q3’s end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, David Einhorn’s Greenlight Capital has the largest position in Dillard’s, Inc. (NYSE:DDS), worth close to $108.5 million, comprising 1.8% of its total 13F portfolio. Coming in second is Cliff Asness of AQR Capital Management, with an $56.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers that are bullish consist of Chuck Royce’s Royce & Associates, Jim Simons’s Renaissance Technologies and Clint Murray’s Lodge Hill Capital.

As aggregate interest increased, some big names have been driving this bullishness. Royce & Associates, managed by Chuck Royce, created the most outsized position in Dillard’s, Inc. (NYSE:DDS). Royce & Associates had $54.7 million invested in the company at the end of the quarter. John Tompkins’s Tyvor Capital also made an $7.9 million investment in the stock during the quarter. The other funds with brand new DDS positions are D. E. Shaw’s D E Shaw, Paul Marshall and Ian Wace’s Marshall Wace LLP, and George Hall’s Clinton Group.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Dillard’s, Inc. (NYSE:DDS) but similarly valued. We will take a look at Kirby Corporation (NYSE:KEX), Atmel Corporation (NASDAQ:ATML), Sovran Self Storage Inc (NYSE:SSS), and Qlik Technologies Inc (NASDAQ:QLIK). This group of stocks’ market caps match DDS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KEX 26 571530 -4
ATML 35 265929 -1
SSS 19 382044 4
QLIK 38 871897 6

As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $523 million. That figure was $321 million in DDS’s case. Qlik Technologies Inc (NASDAQ:QLIK) is the most popular stock in this table. On the other hand Sovran Self Storage Inc (NYSE:SSS) is the least popular one with only 19 bullish hedge fund positions. Dillard’s, Inc. (NYSE:DDS) 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 QLIK might be a better candidate to consider a long position.

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