In this article we will check out the progression of hedge fund sentiment towards Dicks Sporting Goods Inc (NYSE:DKS) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Dicks Sporting Goods Inc (NYSE:DKS) ready to rally soon? Investors who are in the know are turning bullish. The number of long hedge fund bets went up by 1 recently. Our calculations also showed that DKS 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). DKS was in 27 hedge funds’ portfolios at the end of March. There were 26 hedge funds in our database with DKS positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Steve Leonard of Pacifica 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 take a glance at the latest hedge fund action encompassing Dicks Sporting Goods Inc (NYSE:DKS).
How are hedge funds trading Dicks Sporting Goods Inc (NYSE:DKS)?
At Q1’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DKS over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Arrowstreet Capital was the largest shareholder of Dicks Sporting Goods Inc (NYSE:DKS), with a stake worth $35.2 million reported as of the end of September. Trailing Arrowstreet Capital was Tensile Capital, which amassed a stake valued at $24.2 million. D E Shaw, Millennium Management, and AQR 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 Tensile Capital allocated the biggest weight to Dicks Sporting Goods Inc (NYSE:DKS), around 4.77% of its 13F portfolio. Pacifica Capital Investments is also relatively very bullish on the stock, designating 1.6 percent of its 13F equity portfolio to DKS.
Consequently, specific money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the largest position in Dicks Sporting Goods Inc (NYSE:DKS). Balyasny Asset Management had $6 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also made a $4.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Alexander Mitchell’s Scopus Asset Management, Steve Leonard’s Pacifica Capital Investments, and Joel Greenblatt’s Gotham Asset Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Dicks Sporting Goods Inc (NYSE:DKS) but similarly valued. These stocks are Compania de Minas Buenaventura SA (NYSE:BVN), Colliers International Group Inc (NASDAQ:CIGI), Easterly Government Properties Inc (NYSE:DEA), and Sensient Technologies Corporation (NYSE:SXT). This group of stocks’ market valuations are closest to DKS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BVN | 9 | 55975 | -4 |
| CIGI | 10 | 437647 | -3 |
| DEA | 11 | 150675 | 1 |
| SXT | 23 | 83186 | 3 |
| Average | 13.25 | 181871 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $182 million. That figure was $181 million in DKS’s case. Sensient Technologies Corporation (NYSE:SXT) is the most popular stock in this table. On the other hand Compania de Minas Buenaventura SA (NYSE:BVN) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Dicks Sporting Goods Inc (NYSE:DKS) is more popular among hedge funds. 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on DKS as the stock returned 69.6% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
