Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Dorman Products Inc. (NASDAQ:DORM).
Dorman Products Inc. (NASDAQ:DORM) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged and nine funds from our database held shares of the company at the end of the third quarter of 2016. 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 The Corporate Executive Board Company (NYSE:CEB), NorthStar Asset Management Group Inc (NYSE:NSAM), and Synaptics, Incorporated (NASDAQ:SYNA) to gather more data points.
Follow Dorman Products Inc. (NASDAQ:DORM)
Follow Dorman Products Inc. (NASDAQ:DORM)
In the 21st century investor’s toolkit there are a lot of signals investors employ to value their holdings. A duo of the less known signals are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the best money managers can beat the market by a superb margin (see the details here).
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Now, we’re going to take a look at the latest action surrounding Dorman Products Inc. (NASDAQ:DORM).
How are hedge funds trading Dorman Products Inc. (NASDAQ:DORM)?
As stated earlier, At the end of the third quarter, nine funds tracked by Insider Monkey held long positions in this stock, unchanged over the quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Royce & Associates, managed by Chuck Royce, holds the largest position in Dorman Products Inc. (NASDAQ:DORM). Royce & Associates has a $76.1 million position in the stock, comprising 0.5% of its 13F portfolio. Coming in second is Third Avenue Management, managed by Martin Whitman, which holds a $6.4 million position; 0.3% of its 13F portfolio is allocated to the stock. Other professional money managers that are bullish comprise Matthew A. Weatherbie’s Weatherbie Capital, Murray Stahl’s Horizon Asset Management and Cliff Asness’s AQR Capital Management.
Judging by the fact that Dorman Products Inc. (NASDAQ:DORM) has witnessed falling interest from the smart money, logic holds that there exists a select few hedge funds who were dropping their positions entirely last quarter. Intriguingly, Israel Englander’s Millennium Management dumped the biggest position of all the hedgies tracked by Insider Monkey, valued at about $1.9 million in call options.. Ken Griffin’s fund, Citadel Investment Group, also said goodbye to its call options., about $0.3 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review 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 The Corporate Executive Board Company (NYSE:CEB), NorthStar Asset Management Group Inc (NYSE:NSAM), Synaptics, Incorporated (NASDAQ:SYNA), and Minerals Technologies Inc (NYSE:MTX). This group of 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 |
|---|---|---|---|
| CEB | 12 | 66299 | 1 |
| NSAM | 47 | 1035762 | -1 |
| SYNA | 21 | 206919 | -3 |
| MTX | 17 | 166520 | 1 |
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $369 million. That figure was just $94 million in DORM’s case. NorthStar Asset Management Group Inc (NYSE:NSAM) is the most popular stock in this table, with 47 funds holding shares. On the other hand The Corporate Executive Board Company (NYSE:CEB) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Dorman Products Inc. (NASDAQ:DORM) is even less popular than CEB. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
