We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards DineEquity Inc (NYSE:DIN) and what that likely means for the prospects of the company and its stock.
Hedge fund interest towards DineEquity Inc (NYSE:DIN) shares was flat at the end of September. This is usually a negative indicator, although 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 Eaton Vance Ltd Duration Income Fund (NYSEMKT:EVV), Semtech Corporation (NASDAQ:SMTC), and Astoria Financial Corp (NYSE:AF) to gather more data points.
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With all of this in mind, let’s take a gander at the key action surrounding DineEquity Inc (NYSE:DIN).
What does the smart money think about DineEquity Inc (NYSE:DIN)?
Heading into the fourth quarter of 2016, a total of 16 funds tracked by Insider Monkey were long DineEquity, unchanged from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DIN over the last five quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Glenn Fuhrman and John Phelan’s MSD Capital has the most valuable position in DineEquity Inc (NYSE:DIN), worth close to $57.6 million, comprising 14.3% of its total 13F portfolio. The second largest stake is held by Joel Greenblatt of Gotham Asset Management, with a $14.2 million position. Some other peers with similar optimism encompass Steve Cohen’s Point72 Asset Management, Alexander Mitchell’s Scopus Asset Management and Israel Englander’s Millennium Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Judging by the fact that DineEquity Inc (NYSE:DIN) has experienced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there was a specific group of funds that elected to cut their full holdings in the third quarter. Interestingly, Chuck Royce’s Royce & Associates got rid of the biggest stake of all the investors watched by Insider Monkey, totaling an estimated $4 million in stock, and David Costen Haley’s HBK Investments was right behind this move, as the fund cut about $2.3 million worth of shares.
Let’s also examine hedge fund activity in other stocks similar to DineEquity Inc (NYSE:DIN). These stocks are Eaton Vance Ltd Duration Income Fund (NYSEMKT:EVV), Semtech Corporation (NASDAQ:SMTC), Astoria Financial Corp (NYSE:AF), and AZZ Incorporated (NYSE:AZZ). This group of stocks’ market valuations are similar to DIN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EVV | 3 | 4448 | -1 |
| SMTC | 17 | 82951 | 4 |
| AF | 10 | 100297 | -4 |
| AZZ | 10 | 15821 | 1 |
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $51 million, which is lower than the $107 million figure in DIN’s case. Semtech Corporation (NASDAQ:SMTC) is the most popular stock in this table. On the other hand Eaton Vance Ltd Duration Income Fund (NYSEMKT:EVV) is the least popular one with only three investors holding long positions. DineEquity Inc (NYSE:DIN) 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. In this regard Semtech Corporation (NASDAQ:SMTC) might be a better candidate to consider taking a long position in.
Disclosure: None
