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Is Duluth Holdings Inc. (DLTH) Is Burning These Hedge Funds

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the second quarter and hedging or reducing many of their long positions. Some fund managers like this one are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Duluth Holdings Inc. (NASDAQ:DLTH).

Duluth Holdings Inc. (NASDAQ:DLTH) investors should pay attention to a decrease in hedge fund sentiment recently. Our calculations also showed that DLTH isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

DLTH_oct2019

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a gander at the new hedge fund action surrounding Duluth Holdings Inc. (NASDAQ:DLTH).

How are hedge funds trading Duluth Holdings Inc. (NASDAQ:DLTH)?

At the end of the second quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DLTH over the last 16 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

John Overdeck of Two Sigma

More specifically, Two Sigma Advisors was the largest shareholder of Duluth Holdings Inc. (NASDAQ:DLTH), with a stake worth $4.6 million reported as of the end of March. Trailing Two Sigma Advisors was Marshall Wace LLP, which amassed a stake valued at $4.4 million. Citadel Investment Group, Balyasny Asset Management, and Ellington were also very fond of the stock, giving the stock large weights in their portfolios.

Seeing as Duluth Holdings Inc. (NASDAQ:DLTH) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few hedgies that decided to sell off their full holdings heading into Q3. Intriguingly, Charles Paquelet’s Skylands Capital dropped the biggest position of the 750 funds tracked by Insider Monkey, valued at close to $2.3 million in stock. Brandon Osten’s fund, Venator Capital Management, also said goodbye to its stock, about $2.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 2 funds heading into Q3.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Duluth Holdings Inc. (NASDAQ:DLTH) but similarly valued. We will take a look at Prevail Therapeutics Inc. (NASDAQ:PRVL), BBX Capital Corporation (NYSE:BBX), CONSOL Coal Resources LP (NYSE:CCR), and Corbus Pharmaceuticals Holdings Inc (NASDAQ:CRBP). This group of stocks’ market valuations are closest to DLTH’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PRVL 11 292984 11
BBX 15 35360 -1
CCR 4 96102 -1
CRBP 8 49866 -1
Average 9.5 118578 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $119 million. That figure was $19 million in DLTH’s case. BBX Capital Corporation (NYSE:BBX) is the most popular stock in this table. On the other hand CONSOL Coal Resources LP (NYSE:CCR) is the least popular one with only 4 bullish hedge fund positions. Duluth Holdings Inc. (NASDAQ:DLTH) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately DLTH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on DLTH were disappointed as the stock returned -37.6% during the third quarter 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.

Disclosure: None. This article was originally published at Insider Monkey.

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