At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not DASAN Zhone Solutions, Inc. (NASDAQ:DZSI) makes for a good investment right now.
Is DASAN Zhone Solutions, Inc. (NASDAQ:DZSI) going to take off soon? The best stock pickers are taking an optimistic view. The number of long hedge fund bets went up by 3 recently. Our calculations also showed that DZSI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). DZSI was in 9 hedge funds’ portfolios at the end of the third quarter of 2019. There were 6 hedge funds in our database with DZSI holdings at the end of the previous quarter.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
William Graves of Boardman Bay Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We’re going to take a gander at the latest hedge fund action surrounding DASAN Zhone Solutions, Inc. (NASDAQ:DZSI).
How are hedge funds trading DASAN Zhone Solutions, Inc. (NASDAQ:DZSI)?
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the second quarter of 2019. On the other hand, there were a total of 2 hedge funds with a bullish position in DZSI a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Harbert Management was the largest shareholder of DASAN Zhone Solutions, Inc. (NASDAQ:DZSI), with a stake worth $3.4 million reported as of the end of September. Trailing Harbert Management was Renaissance Technologies, which amassed a stake valued at $1.5 million. Boardman Bay Capital Management, Marshall Wace, and Arrowstreet Capital 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 Harbert Management allocated the biggest weight to DASAN Zhone Solutions, Inc. (NASDAQ:DZSI), around 5.12% of its 13F portfolio. Boardman Bay Capital Management is also relatively very bullish on the stock, earmarking 0.5 percent of its 13F equity portfolio to DZSI.
As aggregate interest increased, key hedge funds were breaking ground themselves. Marshall Wace, managed by Paul Marshall and Ian Wace, assembled the biggest position in DASAN Zhone Solutions, Inc. (NASDAQ:DZSI). Marshall Wace had $0.4 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $0.3 million position during the quarter. The other funds with brand new DZSI positions are John Overdeck and David Siegel’s Two Sigma Advisors, Roger Ibbotson’s Zebra Capital Management, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as DASAN Zhone Solutions, Inc. (NASDAQ:DZSI) but similarly valued. We will take a look at BG Staffing Inc (NYSE:BGSF), First Guaranty Bancshares, Inc. (NASDAQ:FGBI), First Capital, Inc. (NASDAQ:FCAP), and Navios Maritime Partners L.P. (NYSE:NMM). All of these stocks’ market caps are closest to DZSI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BGSF | 9 | 9131 | 1 |
| FGBI | 1 | 783 | 0 |
| FCAP | 1 | 434 | 0 |
| NMM | 3 | 2294 | 2 |
| Average | 3.5 | 3161 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.5 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $6 million in DZSI’s case. BG Staffing Inc (NYSE:BGSF) is the most popular stock in this table. On the other hand First Guaranty Bancshares, Inc. (NASDAQ:FGBI) is the least popular one with only 1 bullish hedge fund positions. DASAN Zhone Solutions, Inc. (NASDAQ:DZSI) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately DZSI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on DZSI were disappointed as the stock returned -13% during the fourth quarter (through the end of November) 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 this year.
Disclosure: None. This article was originally published at Insider Monkey.
