Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Deluxe Corporation (NYSE:DLX).
Is Deluxe Corporation (NYSE:DLX) an attractive investment right now? The smart money is in a bearish mood. The number of bullish hedge fund bets decreased by 14 recently. Our calculations also showed that DLX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). DLX was in 15 hedge funds’ portfolios at the end of the first quarter of 2020. There were 29 hedge funds in our database with DLX positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are tons of formulas shareholders have at their disposal to grade stocks. Two of the less utilized formulas are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the best fund managers can beat the broader indices by a significant margin (see the details here).
Israel Englander of Millennium Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the new hedge fund action regarding Deluxe Corporation (NYSE:DLX).
Hedge fund activity in Deluxe Corporation (NYSE:DLX)
At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -48% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DLX over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in Deluxe Corporation (NYSE:DLX) was held by AQR Capital Management, which reported holding $25.9 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $12.5 million position. Other investors bullish on the company included G2 Investment Partners Management, Citadel Investment Group, and D E Shaw. In terms of the portfolio weights assigned to each position G2 Investment Partners Management allocated the biggest weight to Deluxe Corporation (NYSE:DLX), around 2.36% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, designating 0.85 percent of its 13F equity portfolio to DLX.
Because Deluxe Corporation (NYSE:DLX) has experienced a decline in interest from the smart money, it’s safe to say that there is a sect of funds that elected to cut their entire stakes by the end of the first quarter. It’s worth mentioning that Israel Englander’s Millennium Management cut the largest position of all the hedgies monitored by Insider Monkey, comprising about $4.2 million in stock. Minhua Zhang’s fund, Weld Capital Management, also sold off its stock, about $2.4 million worth. These moves are interesting, as aggregate hedge fund interest fell by 14 funds by the end of the first quarter.
Let’s also examine hedge fund activity in other stocks similar to Deluxe Corporation (NYSE:DLX). We will take a look at BancFirst Corporation (NASDAQ:BANF), Dril-Quip, Inc. (NYSE:DRQ), TTM Technologies, Inc. (NASDAQ:TTMI), and Editas Medicine, Inc. (NASDAQ:EDIT). This group of stocks’ market caps are similar to DLX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BANF | 12 | 29557 | 6 |
| DRQ | 13 | 82214 | -8 |
| TTMI | 10 | 64174 | -1 |
| EDIT | 16 | 79121 | 2 |
| Average | 12.75 | 63767 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $63 million in DLX’s case. Editas Medicine, Inc. (NASDAQ:EDIT) is the most popular stock in this table. On the other hand TTM Technologies, Inc. (NASDAQ:TTMI) is the least popular one with only 10 bullish hedge fund positions. Deluxe Corporation (NYSE:DLX) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately DLX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on DLX were disappointed as the stock returned -11.7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
