Is Dynex Capital Inc (NYSE:DX) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Dynex Capital Inc (NYSE:DX) has experienced an increase in hedge fund interest lately. DX was in 7 hedge funds’ portfolios at the end of the third quarter of 2019. There were 6 hedge funds in our database with DX positions at the end of the previous quarter. Our calculations also showed that DX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are tons of gauges stock market investors can use to appraise publicly traded companies. Some of the most under-the-radar gauges are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the elite fund managers can trounce their index-focused peers by a significant amount (see the details here).
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s review the key hedge fund action encompassing Dynex Capital Inc (NYSE:DX).
Hedge fund activity in Dynex Capital Inc (NYSE:DX)
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the previous quarter. On the other hand, there were a total of 5 hedge funds with a bullish position in DX a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Dynex Capital Inc (NYSE:DX) was held by Millennium Management, which reported holding $4.8 million worth of stock at the end of September. It was followed by Almitas Capital with a $4.6 million position. Other investors bullish on the company included Citadel Investment Group, Winton Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position Almitas Capital allocated the biggest weight to Dynex Capital Inc (NYSE:DX), around 4.96% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to DX.
Consequently, key hedge funds have jumped into Dynex Capital Inc (NYSE:DX) headfirst. Almitas Capital, managed by Ron Mass, initiated the biggest position in Dynex Capital Inc (NYSE:DX). Almitas Capital had $4.6 million invested in the company at the end of the quarter. David E. Shaw’s D E Shaw also made a $0.7 million investment in the stock during the quarter. The following funds were also among the new DX investors: Matthew Hulsizer’s PEAK6 Capital Management, Paul Tudor Jones’s Tudor Investment Corp, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s check out hedge fund activity in other stocks similar to Dynex Capital Inc (NYSE:DX). These stocks are Carriage Services, Inc. (NYSE:CSV), Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX), Petmed Express Inc (NASDAQ:PETS), and PlayAGS, Inc. (NYSE:AGS). All of these stocks’ market caps resemble DX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CSV | 9 | 42949 | 0 |
| CRNX | 11 | 159722 | 1 |
| PETS | 13 | 66497 | -4 |
| AGS | 16 | 46231 | 4 |
| Average | 12.25 | 78850 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $15 million in DX’s case. PlayAGS, Inc. (NYSE:AGS) is the most popular stock in this table. On the other hand Carriage Services, Inc. (NYSE:CSV) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Dynex Capital Inc (NYSE:DX) is even less popular than CSV. Hedge funds clearly dropped the ball on DX as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on DX as the stock returned 16.5% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
