Hedge Funds Are Dumping DineEquity Inc (DIN)

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in DineEquity Inc (NYSE:DIN)? The smart money sentiment can provide an answer to this question.

DineEquity Inc (NYSE:DIN) has seen a decrease in activity from the world’s largest hedge funds of late. DIN was in 17 hedge funds’ portfolios at the end of the third quarter of 2015. There were 23 hedge funds in our database with DIN positions 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 ICU Medical, Incorporated (NASDAQ:ICUI), EXACT Sciences Corporation (NASDAQ:EXAS), and DeVry Inc. (NYSE:DV) to gather more data points.

To most shareholders, hedge funds are assumed to be unimportant, old investment tools of years past. While there are greater than 8000 funds in operation at the moment, We choose to focus on the leaders of this club, about 700 funds. These investment experts oversee most of the smart money’s total asset base, and by paying attention to their finest investments, Insider Monkey has deciphered various investment strategies that have historically outpaced the market. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Keeping this in mind, let’s take a peek at the new action encompassing DineEquity Inc (NYSE:DIN).

What have hedge funds been doing with DineEquity Inc (NYSE:DIN)?

Heading into Q4, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 26% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Glenn Fuhrman and John Phelan’s MSD Capital has the biggest position in DineEquity Inc (NYSE:DIN), worth close to $158.3 million, corresponding to 21.1% of its total 13F portfolio. Sitting at the No. 2 spot is Joel Greenblatt of Gotham Asset Management, with a $15.8 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish include Israel Englander’s Millennium Management, John Overdeck and David Siegel’s Two Sigma Advisors and Chuck Royce’s Royce & Associates.

Due to the fact that DineEquity Inc (NYSE:DIN) has experienced a declination in interest from the smart money, we can see that there lies a certain “tier” of hedge funds that slashed their full holdings by the end of the third quarter. Interestingly, Alexander Mitchell’s Scopus Asset Management dumped the largest position of the “upper crust” of funds monitored by Insider Monkey, comprising about $5 million in stock. Glenn Russell Dubin’s fund, Highbridge Capital Management, also sold off its holding, about $1.9 million worth of DIN shares. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 6 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks similar to DineEquity Inc (NYSE:DIN). These stocks are ICU Medical, Incorporated (NASDAQ:ICUI), EXACT Sciences Corporation (NASDAQ:EXAS), DeVry Inc. (NYSE:DV), and Worthington Industries, Inc. (NYSE:WOR). This group of stocks’ market valuations are closest to DIN’s market valuation.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $237 million. That figure was $217 million in DIN’s case. While Worthington Industries, Inc. (NYSE:WOR) is the least popular stock with only 14 bullish hedge fund positions, EXACT Sciences Corporation (NASDAQ:EXAS), ICU Medical, Incorporated (NASDAQ:ICUI) and DineEquity Inc (NYSE:DIN) lead the pack. This is a positive sign and we believe DineEquity Inc (NYSE:DIN) warrants further research to find out whether it is a good candidate for a long position.