The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards DXP Enterprises Inc (NASDAQ:DXPE) .
DXP Enterprises Inc (NASDAQ:DXPE) has experienced an increase in hedge fund interest lately. DXPE was in 9 hedge funds’ portfolios at the end of the third quarter of 2016. There were 6 hedge funds in our database with DXPE positions at the end of the previous quarter. At the end of this article we will also compare DXPE to other stocks including AAC Holdings Inc (NYSE:AAC), Genesis Healthcare Inc (NYSE:GEN), and YRC Worldwide, Inc. (NASDAQ:YRCW) to get a better sense of its popularity.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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Now, let’s analyze the latest action surrounding DXP Enterprises Inc (NASDAQ:DXPE).
Hedge fund activity in DXP Enterprises Inc (NASDAQ:DXPE)
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 50% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DXPE over the last 5 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 boosting their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, GMT Capital, led by Thomas E. Claugus, holds the biggest position in DXP Enterprises Inc (NASDAQ:DXPE). GMT Capital has a $45 million position in the stock, comprising 0.9% of its 13F portfolio. On GMT Capital’s heels is Renaissance Technologies, one of the largest hedge funds in the world, which holds a $2.8 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism contain D. E. Shaw’s D E Shaw, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. 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.
Consequently, some big names have been driving this bullishness. Millennium Management,, initiated the largest position in DXP Enterprises Inc (NASDAQ:DXPE). Millennium Management had $2.3 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $1.2 million investment in the stock during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as DXP Enterprises Inc (NASDAQ:DXPE) but similarly valued. These stocks are AAC Holdings Inc (NYSE:AAC), Genesis Healthcare Inc (NYSE:GEN), YRC Worldwide, Inc. (NASDAQ:YRCW), and Blue Hills Bancorp Inc (NASDAQ:BHBK). All of these stocks’ market caps are closest to DXPE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AAC | 6 | 46564 | -1 |
| GEN | 5 | 2172 | -1 |
| YRCW | 19 | 112255 | -1 |
| BHBK | 14 | 48076 | -2 |
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $55 million in DXPE’s case. YRC Worldwide, Inc. (NASDAQ:YRCW) is the most popular stock in this table. On the other hand Genesis Healthcare Inc (NYSE:GEN) is the least popular one with only 5 bullish hedge fund positions. DXP Enterprises Inc (NASDAQ:DXPE) 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 YRCW might be a better candidate to consider taking a long position in.
Disclosure: none
