Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Dorman Products Inc. (NASDAQ:DORM).
Dorman Products Inc. (NASDAQ:DORM) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 21 hedge funds’ portfolios at the end of March. Our calculations also showed that DORM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Sensient Technologies Corporation (NYSE:SXT), NorthWestern Corporation (NYSE:NWE), and ViaSat, Inc. (NASDAQ:VSAT) to gather more data points.
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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. Keeping this in mind let’s take a look at the recent hedge fund action surrounding Dorman Products Inc. (NASDAQ:DORM).
Do Hedge Funds Think DORM Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DORM over the last 23 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in Dorman Products Inc. (NASDAQ:DORM), which was worth $37.8 million at the end of the fourth quarter. On the second spot was Arrowstreet Capital which amassed $11.9 million worth of shares. Intrinsic Edge Capital, Millennium Management, and Renaissance Technologies 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 Minerva Advisors allocated the biggest weight to Dorman Products Inc. (NASDAQ:DORM), around 1.04% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, setting aside 0.71 percent of its 13F equity portfolio to DORM.
Due to the fact that Dorman Products Inc. (NASDAQ:DORM) has witnessed a decline in interest from the smart money, we can see that there lies a certain “tier” of hedge funds that decided to sell off their entire stakes by the end of the first quarter. Intriguingly, Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital) said goodbye to the largest position of the “upper crust” of funds followed by Insider Monkey, comprising about $2.2 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund dropped about $0.7 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Dorman Products Inc. (NASDAQ:DORM) but similarly valued. We will take a look at Sensient Technologies Corporation (NYSE:SXT), NorthWestern Corporation (NYSE:NWE), ViaSat, Inc. (NASDAQ:VSAT), International Game Technology PLC (NYSE:IGT), HB Fuller Co (NYSE:FUL), National Health Investors Inc (NYSE:NHI), and Installed Building Products Inc (NYSE:IBP). All of these stocks’ market caps are closest to DORM’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 19.7 hedge funds with bullish positions and the average amount invested in these stocks was $284 million. That figure was $98 million in DORM’s case. International Game Technology PLC (NYSE:IGT) is the most popular stock in this table. On the other hand NorthWestern Corporation (NYSE:NWE) is the least popular one with only 11 bullish hedge fund positions. Dorman Products Inc. (NASDAQ:DORM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DORM is 54.2. 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 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately DORM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on DORM were disappointed as the stock returned 0.7% since the end of March (through 7/16) 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.
Follow Dorman Products Inc. (NASDAQ:DORM)
Follow Dorman Products Inc. (NASDAQ:DORM)
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Disclosure: None. This article was originally published at Insider Monkey.