Hedge Funds Are Selling Drew Industries, Inc. (DW)

It was a rough third quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during the quarter. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 14 percentage points between June 25 and October 30, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Drew Industries, Inc. (NYSE:DW) during the quarter below.

Drew Industries, Inc. (NYSE:DW) has experienced a decrease in the hedge fund interest of late. 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 Renasant Corp. (NASDAQ:RNST), BlackRock Credit All Inc Trust IV (NYSE:BTZ), and Noah Holdings Limited (ADR) (NYSE:NOAH) to gather more data points.

To most investors, hedge funds are assumed to be worthless, old financial tools of years past. While there are more than an 8000 funds in operation at present, Our researchers choose to focus on the top tier of this club, approximately 700 funds. Most estimates calculate that this group of people orchestrate bulk of the smart money’s total asset base, and by following their top investments, Insider Monkey has figured out several investment strategies that have historically beaten the broader indices. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Now, we’re going to take a peek at the key action encompassing Drew Industries, Inc. (NYSE:DW).

How have hedgies been trading Drew Industries, Inc. (NYSE:DW)?

Heading into Q4, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 20% from the second quarter. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the biggest position in Drew Industries, Inc. (NYSE:DW). Royce & Associates has a $46.3 million position in the stock, comprising 0.2% of its 13F portfolio. The second most bullish fund manager is Julian Allen of Spitfire Capital, with a $5.9 million position; the fund has 2.5% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish consist of Jim Simons’ Renaissance Technologies, Mark Broach’s Manatuck Hill Partners and Cliff Asness’ AQR Capital Management.

Judging by the fact that Drew Industries, Inc. (NYSE:DW) has witnessed falling interest from hedge fund managers, we can see that there exists a select few funds that decided to sell off their entire stakes by the end of the third quarter. It’s worth mentioning that Matthew Tewksbury’s Stevens Capital Management sold off the largest investment of the “upper crust” of funds followed by Insider Monkey, worth an estimated $0.7 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $0.6 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 3 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks similar to Drew Industries, Inc. (NYSE:DW). We will take a look at Renasant Corp. (NASDAQ:RNST), BlackRock Credit All Inc Trust IV (NYSE:BTZ), Noah Holdings Limited (ADR) (NYSE:NOAH), and PMC-Sierra Inc (NASDAQ:PMCS). This group of stocks’ market valuations match DW’s market valuation.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $161 million, which is higher than the $64 million in DW’s case. PMC-Sierra Inc (NASDAQ:PMCS) is the most popular stock in this table, while Noah Holdings Limited (ADR) (NYSE:NOAH) is the least popular one with only 7 bullish hedge fund positions. Drew Industries, Inc. (NYSE:DW) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PMCS might be a better candidate to consider a long position.