Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 823 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 Dunkin Brands Group Inc (NASDAQ:DNKN) in this article.
Is Dunkin Brands Group Inc (NASDAQ:DNKN) a cheap investment right now? Hedge funds were taking a bullish view. The number of long hedge fund bets increased by 1 recently. Dunkin Brands Group Inc (NASDAQ:DNKN) was in 35 hedge funds’ portfolios at the end of June. The all time high for this statistics is 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that DNKN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 34 hedge funds in our database with DNKN holdings at the end of March.
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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind we’re going to review the fresh hedge fund action regarding Dunkin Brands Group Inc (NASDAQ:DNKN).
How have hedgies been trading Dunkin Brands Group Inc (NASDAQ:DNKN)?
Heading into the third quarter of 2020, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DNKN over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Citadel Investment Group was the largest shareholder of Dunkin Brands Group Inc (NASDAQ:DNKN), with a stake worth $139.5 million reported as of the end of June. Trailing Citadel Investment Group was Melvin Capital Management, which amassed a stake valued at $65.2 million. Two Sigma Advisors, Junto Capital Management, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position MIK Capital allocated the biggest weight to Dunkin Brands Group Inc (NASDAQ:DNKN), around 3.5% of its 13F portfolio. Junto Capital Management is also relatively very bullish on the stock, designating 1.88 percent of its 13F equity portfolio to DNKN.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into Dunkin Brands Group Inc (NASDAQ:DNKN) headfirst. Melvin Capital Management, managed by Gabriel Plotkin, established the biggest position in Dunkin Brands Group Inc (NASDAQ:DNKN). Melvin Capital Management had $65.2 million invested in the company at the end of the quarter. James Parsons’s Junto Capital Management also initiated a $43.9 million position during the quarter. The following funds were also among the new DNKN investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Leon Shaulov’s Maplelane Capital, and Kamyar Khajavi’s MIK Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Dunkin Brands Group Inc (NASDAQ:DNKN) but similarly valued. We will take a look at First American Financial Corp (NYSE:FAF), Jones Lang LaSalle Inc (NYSE:JLL), Woori Financial Group Inc. (NYSE:WF), Corelogic Inc (NYSE:CLGX), Columbia Sportswear Company (NASDAQ:COLM), United Therapeutics Corporation (NASDAQ:UTHR), and Levi Strauss & Co. (NYSE:LEVI). This group of stocks’ market valuations match DNKN’s market valuation.
|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 25.9 hedge funds with bullish positions and the average amount invested in these stocks was $524 million. That figure was $417 million in DNKN’s case. First American Financial Corp (NYSE:FAF) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 5 bullish hedge fund positions. Dunkin Brands Group Inc (NASDAQ:DNKN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DNKN is 74.5. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. Hedge funds were also right about betting on DNKN as the stock returned 53.7% since the end of Q2 (through 10/30) 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.