Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about DSP Group, Inc. (NASDAQ:DSPG) in this article.
Is DSPG a good stock to buy now? Investors who are in the know were selling. The number of long hedge fund bets decreased by 2 in recent months. DSP Group, Inc. (NASDAQ:DSPG) was in 14 hedge funds’ portfolios at the end of September. The all time high for this statistic is 17. Our calculations also showed that DSPG 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 review the latest hedge fund action surrounding DSP Group, Inc. (NASDAQ:DSPG).
Do Hedge Funds Think DSPG Is A Good Stock To Buy Now?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DSPG over the last 21 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Richard Mashaal’s Rima Senvest Management has the biggest position in DSP Group, Inc. (NASDAQ:DSPG), worth close to $23.2 million, amounting to 1.3% of its total 13F portfolio. On Rima Senvest Management’s heels is Renaissance Technologies, holding a $16.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish comprise Cynthia Paul’s Lynrock Lake, John Overdeck and David Siegel’s Two Sigma Advisors and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Rima Senvest Management allocated the biggest weight to DSP Group, Inc. (NASDAQ:DSPG), around 1.31% of its 13F portfolio. Lynrock Lake is also relatively very bullish on the stock, designating 0.61 percent of its 13F equity portfolio to DSPG.
Due to the fact that DSP Group, Inc. (NASDAQ:DSPG) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there were a few fund managers that elected to cut their entire stakes heading into Q4. At the top of the heap, Michael Gelband’s ExodusPoint Capital sold off the biggest position of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $0.5 million in stock. Donald Sussman’s fund, Paloma Partners, also sold off its stock, about $0.3 million worth. These moves are interesting, as aggregate hedge fund interest fell by 2 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as DSP Group, Inc. (NASDAQ:DSPG) but similarly valued. These stocks are OptimizeRx Corporation (NASDAQ:OPRX), Meten EdtechX Education Group Ltd. (NASDAQ:METX), Conn’s, Inc. (NASDAQ:CONN), HBT Financial, Inc. (NASDAQ:HBT), Galiano Gold Inc. (NYSE:GAU), Willdan Group, Inc. (NASDAQ:WLDN), and Farmers National Banc Corp (NASDAQ:FMNB). All of these stocks’ market caps match DSPG’s market cap.
|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 6.9 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $57 million in DSPG’s case. Conn’s, Inc. (NASDAQ:CONN) is the most popular stock in this table. On the other hand Meten EdtechX Education Group Ltd. (NASDAQ:METX) is the least popular one with only 3 bullish hedge fund positions. DSP Group, Inc. (NASDAQ:DSPG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DSPG is 77.7. 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. Hedge funds were also right about betting on DSPG as the stock returned 31.3% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.