Hedge Funds Are Dumping Diana Shipping Inc. (DSX)

How do we determine whether Diana Shipping Inc. (NYSE:DSX) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Diana Shipping Inc. (NYSE:DSX) was in 12 hedge funds’ portfolios at the end of September. DSX has experienced a decrease in hedge fund interest of late. There were 15 hedge funds in our database with DSX holdings at the end of the previous quarter. 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 Alamo Group, Inc. (NYSE:ALG), CoBiz Financial Inc (NASDAQ:COBZ), and Frontline Ltd (NYSE:FRO) to gather more data points.

If you’d ask most investors, hedge funds are viewed as worthless, old financial vehicles of yesteryear. While there are more than 8000 funds in operation today, Our experts choose to focus on the masters of this club, about 700 funds. These investment experts oversee most of all hedge funds’ total capital, and by keeping an eye on their matchless equity investments, Insider Monkey has uncovered a number of investment strategies that have historically outrun 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.

Now, we’re going to analyze the recent action surrounding Diana Shipping Inc. (NYSE:DSX).

How are hedge funds trading Diana Shipping Inc. (NYSE:DSX)?

At the Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the second quarter. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, 12 West Capital Management, managed by Joel Ramin, holds the most valuable position in Diana Shipping Inc. (NYSE:DSX). 12 West Capital Management has a $21.5 million position in the stock, comprising 3.1% of its 13F portfolio. On 12 West Capital Management’s heels is Royce & Associates, led by Chuck Royce, holding a $11.4 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining professional money managers that hold long positions contain David Iben’s Kopernik Global Investors, Jim Simons’s Renaissance Technologies and Arvind Sanger’s GeoSphere Capital Management.

Because Diana Shipping Inc. (NYSE:DSX) has experienced falling interest from the smart money, it’s safe to say that there was a specific group of hedge funds that decided to sell off their entire stakes heading into Q4. At the top of the heap, Manish Chopra’s Tiger Veda dropped the biggest investment of the 700 funds monitored by Insider Monkey, valued at an estimated $19.9 million in stock, and Howard Marks’s Oaktree Capital Management was right behind this move, as the fund dropped about $3.4 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 3 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Diana Shipping Inc. (NYSE:DSX). These stocks are Alamo Group, Inc. (NYSE:ALG), CoBiz Financial Inc (NASDAQ:COBZ), Frontline Ltd (NYSE:FRO), and The Marcus Corporation (NYSE:MCS). This group of stocks’ market values are closest to DSX’s market value.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $48 million in DSX’s case. Frontline Ltd (NYSE:FRO) is the most popular stock in this table. On the other hand CoBiz Financial Inc (NASDAQ:COBZ) is the least popular one with only 6 bullish hedge fund positions. Diana Shipping Inc. (NYSE:DSX) 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. In this regard FRO might be a better candidate to consider a long position.