The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of June 28. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Diplomat Pharmacy Inc (NYSE:DPLO).
Is Diplomat Pharmacy Inc (NYSE:DPLO) a buy, sell, or hold? Hedge funds are taking a bearish view. The number of bullish hedge fund bets were trimmed by 6 recently. Our calculations also showed that DPLO isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to 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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Unlike other investors who track every movement of the 25 largest hedge funds, our long-short investment strategy relies on hedge fund buy/sell signals given by the 100 best performing hedge funds. We’re going to take a peek at the key hedge fund action surrounding Diplomat Pharmacy Inc (NYSE:DPLO).
What have hedge funds been doing with Diplomat Pharmacy Inc (NYSE:DPLO)?
At Q2’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -43% from the first quarter of 2019. On the other hand, there were a total of 13 hedge funds with a bullish position in DPLO a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Deerfield Management, managed by James E. Flynn, holds the biggest position in Diplomat Pharmacy Inc (NYSE:DPLO). Deerfield Management has a $42.9 million position in the stock, comprising 1.5% of its 13F portfolio. The second most bullish fund manager is Steven Boyd of Armistice Capital, with a $19.5 million position; 1.2% of its 13F portfolio is allocated to the company. Remaining professional money managers that hold long positions consist of D. E. Shaw’s D E Shaw, John Overdeck and David Siegel’s Two Sigma Advisors and Renaissance Technologies.
Due to the fact that Diplomat Pharmacy Inc (NYSE:DPLO) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there exists a select few hedgies that decided to sell off their positions entirely last quarter. At the top of the heap, Israel Englander’s Millennium Management sold off the biggest position of the 750 funds tracked by Insider Monkey, worth about $9.3 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dropped about $4.4 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 6 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Diplomat Pharmacy Inc (NYSE:DPLO) but similarly valued. These stocks are Sentinel Energy Services Inc. (NASDAQ:STNL), Flexion Therapeutics Inc (NASDAQ:FLXN), BioSpecifics Technologies Corp. (NASDAQ:BSTC), and The Lovesac Company (NASDAQ:LOVE). This group of stocks’ market values are closest to DPLO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STNL | 15 | 137785 | 0 |
| FLXN | 15 | 112021 | 0 |
| BSTC | 11 | 55210 | -1 |
| LOVE | 10 | 45613 | 2 |
| Average | 12.75 | 87657 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $88 million. That figure was $71 million in DPLO’s case. Sentinel Energy Services Inc. (NASDAQ:STNL) is the most popular stock in this table. On the other hand The Lovesac Company (NASDAQ:LOVE) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Diplomat Pharmacy Inc (NYSE:DPLO) is even less popular than LOVE. Hedge funds dodged a bullet by taking a bearish stance towards DPLO. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately DPLO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); DPLO investors were disappointed as the stock returned -19.5% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
