Where Do Hedge Funds Stand On Desktop Metal, Inc. (DM)?

The Insider Monkey team has completed processing the quarterly 13F filings for the June quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Desktop Metal, Inc. (NYSE:DM).

Is Desktop Metal, Inc. (NYSE:DM) the right investment to pursue these days? Prominent investors were turning bullish. The number of long hedge fund bets advanced by 7 in recent months. Desktop Metal, Inc. (NYSE:DM) was in 27 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 24. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that DM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s take a glance at the latest hedge fund action regarding Desktop Metal, Inc. (NYSE:DM).

Do Hedge Funds Think DM Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 35% from the first quarter of 2020. On the other hand, there were a total of 0 hedge funds with a bullish position in DM a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is DM A Good Stock To Buy?

More specifically, Miller Value Partners was the largest shareholder of Desktop Metal, Inc. (NYSE:DM), with a stake worth $58.6 million reported as of the end of June. Trailing Miller Value Partners was XN Exponent Advisors, which amassed a stake valued at $29.1 million. ARK Investment Management, CaaS Capital, and Zevenbergen Capital Investments 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 Miller Value Partners allocated the biggest weight to Desktop Metal, Inc. (NYSE:DM), around 1.39% of its 13F portfolio. XN Exponent Advisors is also relatively very bullish on the stock, dishing out 1.37 percent of its 13F equity portfolio to DM.

Consequently, key money managers have been driving this bullishness. CaaS Capital, managed by Frank Fu, initiated the most valuable position in Desktop Metal, Inc. (NYSE:DM). CaaS Capital had $17.6 million invested in the company at the end of the quarter. Simon Sadler’s Segantii Capital also initiated a $3.5 million position during the quarter. The following funds were also among the new DM investors: Daniel S. Och’s OZ Management, Jeffrey Diehl’s Adams Street Partners, and Jack Ripsteen’s Potrero Capital Research.

Let’s now review hedge fund activity in other stocks similar to Desktop Metal, Inc. (NYSE:DM). These stocks are Trinity Industries, Inc. (NYSE:TRN), Energizer Holdings, Inc. (NYSE:ENR), American States Water Co (NYSE:AWR), Sprouts Farmers Market Inc (NASDAQ:SFM), Verint Systems Inc. (NASDAQ:VRNT), NanoString Technologies Inc (NASDAQ:NSTG), and Viper Energy Partners LP (NASDAQ:VNOM). This group of stocks’ market valuations resemble DM’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TRN 20 636585 -8
ENR 17 209102 -5
AWR 14 47916 0
SFM 25 245919 4
VRNT 30 629961 4
NSTG 25 773889 0
VNOM 12 93531 2
Average 20.4 376700 -0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.4 hedge funds with bullish positions and the average amount invested in these stocks was $377 million. That figure was $178 million in DM’s case. Verint Systems Inc. (NASDAQ:VRNT) is the most popular stock in this table. On the other hand Viper Energy Partners LP (NASDAQ:VNOM) is the least popular one with only 12 bullish hedge fund positions. Desktop Metal, Inc. (NYSE:DM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DM is 81.7. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately DM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on DM were disappointed as the stock returned -39.8% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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