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: DHT Holdings Inc (NYSE:DHT).
Is DHT Holdings Inc (NYSE:DHT) undervalued? Money managers are buying. The number of long hedge fund bets inched up by 2 recently. Our calculations also showed that DHT isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to take a look at the fresh hedge fund action regarding DHT Holdings Inc (NYSE:DHT).
How have hedgies been trading DHT Holdings Inc (NYSE:DHT)?
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the second quarter of 2018. By comparison, 12 hedge funds held shares or bullish call options in DHT heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Lansdowne Partners, managed by Alex Snow, holds the number one position in DHT Holdings Inc (NYSE:DHT). Lansdowne Partners has a $17.1 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Jim Simons of Renaissance Technologies, with a $16.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that are bullish encompass Kevin Michael Ulrich and Anthony Davis’s Anchorage Advisors, Joshua Friedman and Mitchell Julis’s Canyon Capital Advisors and Clint Carlson’s Carlson Capital.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Rubric Capital Management, managed by David Rosen, initiated the most valuable position in DHT Holdings Inc (NYSE:DHT). Rubric Capital Management had $2.5 million invested in the company at the end of the quarter. Ari Zweiman’s 683 Capital Partners also made a $1.6 million investment in the stock during the quarter. The other funds with brand new DHT positions are Jeffrey Talpins’s Element Capital Management and Israel Englander’s Millennium Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as DHT Holdings Inc (NYSE:DHT) but similarly valued. These stocks are Team, Inc. (NYSE:TISI), Fidelity Southern Corporation (NASDAQ:LION), Photronics, Inc. (NASDAQ:PLAB), and MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT). All of these stocks’ market caps are closest to DHT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TISI | 12 | 116715 | 0 |
| LION | 9 | 32687 | 0 |
| PLAB | 14 | 70199 | 2 |
| MCFT | 22 | 154523 | 0 |
| Average | 14.25 | 93531 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $61 million in DHT’s case. MCBC Holdings Inc (NASDAQ:MCFT) is the most popular stock in this table. On the other hand Fidelity Southern Corporation (NASDAQ:LION) is the least popular one with only 9 bullish hedge fund positions. DHT Holdings Inc (NYSE:DHT) 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 MCFT might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
