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 DASAN Zhone Solutions, Inc. (NASDAQ:DZSI).
Is DASAN Zhone Solutions, Inc. (NASDAQ:DZSI) a good investment today? Investors who are in the know are turning less bullish. The number of bullish hedge fund bets retreated by 1 recently. Our calculations also showed that DZSI 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 87% since March 2017 and outperformed the S&P 500 ETFs by more than 51 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
William Graves of Boardman Bay Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s check out the recent hedge fund action regarding DASAN Zhone Solutions, Inc. (NASDAQ:DZSI).
How are hedge funds trading DASAN Zhone Solutions, Inc. (NASDAQ:DZSI)?
At Q1’s end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from one quarter earlier. By comparison, 2 hedge funds held shares or bullish call options in DZSI a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in DASAN Zhone Solutions, Inc. (NASDAQ:DZSI), which was worth $1.8 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $0.5 million worth of shares. Arrowstreet Capital, Boardman Bay Capital Management, and Zebra Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to DASAN Zhone Solutions, Inc. (NASDAQ:DZSI), around 0.25% of its 13F portfolio. Boardman Bay Capital Management is also relatively very bullish on the stock, designating 0.19 percent of its 13F equity portfolio to DZSI.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Springbok Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified DZSI as a viable investment and initiated a position in the stock.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as DASAN Zhone Solutions, Inc. (NASDAQ:DZSI) but similarly valued. These stocks are Champions Oncology, Inc. (NASDAQ:CSBR), Daseke, Inc. (NASDAQ:DSKE), Salisbury Bancorp, Inc. (NASDAQ:SAL), and Meridian Corporation (NASDAQ:MRBK). This group of stocks’ market values are similar to DZSI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CSBR | 1 | 1310 | 0 |
| DSKE | 5 | 1590 | -2 |
| SAL | 1 | 2040 | -1 |
| MRBK | 7 | 10798 | 1 |
| Average | 3.5 | 3935 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.5 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $3 million in DZSI’s case. Meridian Corporation (NASDAQ:MRBK) is the most popular stock in this table. On the other hand Champions Oncology, Inc. (NASDAQ:CSBR) is the least popular one with only 1 bullish hedge fund positions. DASAN Zhone Solutions, Inc. (NASDAQ:DZSI) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on DZSI as the stock returned 75.4% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
