Is Dominion Diamond Corp (DDC) Going to Burn These Hedge Funds?

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Judging by the fact that Dominion Diamond Corp (NYSE:DDC) has faced falling interest from hedge fund managers, it’s easy to see that there is a sect of money managers who were dropping their full holdings by the end of the third quarter. Interestingly, Steve Pei’s Gratia Capital dumped the biggest investment of the 700 funds followed by Insider Monkey, worth an estimated $4.2 million in stock. Mark N. Diker’s fund, Diker Management, also cut its stock, about $3.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 4 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Dominion Diamond Corp (NYSE:DDC) but similarly valued. These stocks are New Senior Investment Group Inc (NYSE:SNR), Just Energy Group, Inc. Ordinary Shares (Canada) (NYSE:JE), HeartWare International Inc (NASDAQ:HTWR), and Golar LNG Partners LP (NASDAQ:GMLP). All of these stocks’ market caps are closest to DDC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SNR 17 262030 -10
JE 10 14062 3
HTWR 21 216329 6
GMLP 4 27198 -3

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $130 million, versus $71 million in DDC’s case. HeartWare International Inc (NASDAQ:HTWR) is the most popular stock in this table, while Golar LNG Partners LP (NASDAQ:GMLP) is the least popular one with only 4 bullish hedge fund positions. Dominion Diamond Corp (NYSE:DDC) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard HTWR might be a better candidate to consider a long position.

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