It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 8 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Dana Incorporated (NYSE:DAN).
Hedge fund interest in Dana Incorporated (NYSE:DAN) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Ambarella Inc (NASDAQ:AMBA), ESCO Technologies Inc. (NYSE:ESE), and Ladder Capital Corp (NYSE:LADR) to gather more data points. Our calculations also showed that DAN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Dmitry Balyasny of Balyasny Asset Managemnet
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the new hedge fund action surrounding Dana Incorporated (NYSE:DAN).
How are hedge funds trading Dana Incorporated (NYSE:DAN)?
At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DAN over the last 17 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.
More specifically, AQR Capital Management was the largest shareholder of Dana Incorporated (NYSE:DAN), with a stake worth $55.1 million reported as of the end of September. Trailing AQR Capital Management was GAMCO Investors, which amassed a stake valued at $50.7 million. Glendon Capital Management, Anchor Bolt Capital, and Balyasny Asset Management 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 Glendon Capital Management allocated the biggest weight to Dana Incorporated (NYSE:DAN), around 4.28% of its portfolio. Anchor Bolt Capital is also relatively very bullish on the stock, designating 3.09 percent of its 13F equity portfolio to DAN.
Seeing as Dana Incorporated (NYSE:DAN) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there exists a select few hedgies that decided to sell off their entire stakes in the third quarter. Interestingly, Javier Velazquez’s Albar Capital sold off the biggest investment of all the hedgies monitored by Insider Monkey, valued at an estimated $5.6 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also dumped its stock, about $3.2 million worth. These bearish behaviors 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 similar to Dana Incorporated (NYSE:DAN). We will take a look at Ambarella Inc (NASDAQ:AMBA), ESCO Technologies Inc. (NYSE:ESE), Ladder Capital Corp (NYSE:LADR), and Core Laboratories N.V. (NYSE:CLB). This group of stocks’ market values resemble DAN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMBA | 28 | 255178 | 7 |
| ESE | 8 | 3101 | 4 |
| LADR | 12 | 46418 | -1 |
| CLB | 14 | 150203 | -7 |
| Average | 15.5 | 113725 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $192 million in DAN’s case. Ambarella Inc (NASDAQ:AMBA) is the most popular stock in this table. On the other hand ESCO Technologies Inc. (NYSE:ESE) is the least popular one with only 8 bullish hedge fund positions. Dana Incorporated (NYSE:DAN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on DAN as the stock returned 18.1% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
