Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the fourth quarter, many investors lost money due to unpredictable events such as the sudden increase in long-term interest rates and unintended consequences of the trade war with China. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Dorman Products Inc. (NASDAQ:DORM) changed recently.
Dorman Products Inc. (NASDAQ:DORM) investors should pay attention to an increase in enthusiasm from smart money recently. DORM was in 11 hedge funds’ portfolios at the end of the third quarter of 2018. There were 10 hedge funds in our database with DORM positions at the end of the previous quarter. Our calculations also showed that DORM isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a look at the new hedge fund action regarding Dorman Products Inc. (NASDAQ:DORM).
How are hedge funds trading Dorman Products Inc. (NASDAQ:DORM)?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DORM over the last 13 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Dorman Products Inc. (NASDAQ:DORM) was held by Royce & Associates, which reported holding $60.8 million worth of stock at the end of September. It was followed by Third Avenue Management with a $3.4 million position. Other investors bullish on the company included Horizon Asset Management, Millennium Management, and Prescott Group Capital Management.
Consequently, key money managers have been driving this bullishness. BlueCrest Capital Mgmt., managed by Michael Platt and William Reeves, initiated the largest position in Dorman Products Inc. (NASDAQ:DORM). BlueCrest Capital Mgmt. had $0.4 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $0.2 million position during the quarter. The only other fund with a new position in the stock is Matthew Hulsizer’s PEAK6 Capital Management.
Let’s go over hedge fund activity in other stocks similar to Dorman Products Inc. (NASDAQ:DORM). We will take a look at Five9 Inc (NASDAQ:FIVN), Liberty Oilfield Services Inc. (NYSE:LBRT), Quidel Corporation (NASDAQ:QDEL), and Sotheby’s (NYSE:BID). 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 |
|---|---|---|---|
| FIVN | 25 | 463899 | -1 |
| LBRT | 8 | 127003 | 1 |
| QDEL | 15 | 132346 | -2 |
| BID | 25 | 442569 | 5 |
| Average | 18.25 | 291454 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $291 million. That figure was $72 million in DORM’s case. Five9 Inc (NASDAQ:FIVN) is the most popular stock in this table. On the other hand Liberty Oilfield Services Inc. (NYSE:LBRT) is the least popular one with only 8 bullish hedge fund positions. Dorman Products Inc. (NASDAQ:DORM) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard FIVN might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
