It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a foolproof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong sometimes, as in the case of some of their top picks from the index like Micron and Anadarko. The data, though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.
Douglas Dynamics Inc (NYSE:PLOW) has seen an increase in hedge fund interest in recent months. 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 Re/Max Holdings Inc (NYSE:RMAX), Dorchester Minerals LP (NASDAQ:DMLP), and CARBO Ceramics Inc. (NYSE:CRR) to gather more data points.
Follow Douglas Dynamics Inc (NYSE:PLOW)
Follow Douglas Dynamics Inc (NYSE:PLOW)
In the eyes of most traders, hedge funds are seen as unimportant, outdated financial tools of the past. While there are more than 8000 funds in operation at the moment, Our experts hone in on the masters of this group, approximately 700 funds. Most estimates calculate that this group of people have their hands on the majority of the hedge fund industry’s total asset base, and by observing their first-class equity investments, Insider Monkey has deciphered many investment strategies that have historically outpaced the broader indices. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per year for a decade in their back tests.
With all of this in mind, we’re going to view the key action surrounding Douglas Dynamics Inc (NYSE:PLOW).
Hedge fund activity in Douglas Dynamics Inc (NYSE:PLOW)
Heading into Q4, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a rise of 33% from the second quarter. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Peter Schliemann’s Rutabaga Capital Management has the most valuable position in Douglas Dynamics Inc (NYSE:PLOW), worth close to $13.9 million, corresponding to 1.7% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, led by Jim Simons, holding a $3.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that hold long positions comprise Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and Chuck Royce’s Royce & Associates.
Consequently, specific money managers have been driving this bullishness. Lafitte Capital Management, managed by Bryant Regan, established the most outsized position in Douglas Dynamics Inc (NYSE:PLOW). The fund had a reported $1 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron’s Algert Coldiron Investors also initiated a $0.4 million position during the quarter. The other funds with brand new PLOW positions are D. E. Shaw’s D E Shaw, John Overdeck and David Siegel’s Two Sigma Advisors, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Douglas Dynamics Inc (NYSE:PLOW) but similarly valued. We will take a look at Re/Max Holdings Inc (NYSE:RMAX), Dorchester Minerals LP (NASDAQ:DMLP), CARBO Ceramics Inc. (NYSE:CRR), and Stein Mart, Inc. (NASDAQ:SMRT). This group of stocks’ market caps resemble PLOW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RMAX | 5 | 10176 | -5 |
| DMLP | 5 | 9763 | -1 |
| CRR | 7 | 32194 | -7 |
| SMRT | 13 | 62235 | -3 |
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $28 million in PLOW’s case. Stein Mart, Inc. (NASDAQ:SMRT) is the most popular stock in this table. On the other hand Re/Max Holdings Inc (NYSE:RMAX) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Douglas Dynamics Inc (NYSE:PLOW) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
