We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like DASAN Zhone Solutions, Inc. (NASDAQ:DZSI).
Is DASAN Zhone Solutions, Inc. (NASDAQ:DZSI) an exceptional investment today? The smart money is taking a bullish view. The number of long hedge fund positions increased by 4 lately. Our calculations also showed that DZSI 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. We’re going to view the latest hedge fund action surrounding DASAN Zhone Solutions, Inc. (NASDAQ:DZSI).
What have hedge funds been doing with DASAN Zhone Solutions, Inc. (NASDAQ:DZSI)?
At Q2’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 200% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DZSI over the last 16 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
Among these funds, Harbert Management held the most valuable stake in DASAN Zhone Solutions, Inc. (NASDAQ:DZSI), which was worth $4.9 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $1.8 million worth of shares. Moreover, Boardman Bay Capital Management, Millennium Management, and Lynrock Lake were also bullish on DASAN Zhone Solutions, Inc. (NASDAQ:DZSI), allocating a large percentage of their portfolios to this stock.
Now, some big names were leading the bulls’ herd. Boardman Bay Capital Management, managed by Will Graves, initiated the largest position in DASAN Zhone Solutions, Inc. (NASDAQ:DZSI). Boardman Bay Capital Management had $0.6 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0.3 million position during the quarter. The other funds with new positions in the stock are Cynthia Paul’s Lynrock Lake and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s now review hedge fund activity in other stocks similar to DASAN Zhone Solutions, Inc. (NASDAQ:DZSI). We will take a look at MutualFirst Financial, Inc. (NASDAQ:MFSF), Pacific City Financial Corporation (NASDAQ:PCB), Permian Basin Royalty Trust (NYSE:PBT), and Entravision Communication Corporation (NYSE:EVC). This group of stocks’ market caps are similar to DZSI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MFSF | 3 | 28796 | 0 |
| PCB | 2 | 26436 | 0 |
| PBT | 6 | 10023 | 0 |
| EVC | 15 | 20611 | 4 |
| Average | 6.5 | 21467 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $8 million in DZSI’s case. Entravision Communication Corporation (NYSE:EVC) is the most popular stock in this table. On the other hand Pacific City Financial Corporation (NASDAQ:PCB) is the least popular one with only 2 bullish hedge fund positions. DASAN Zhone Solutions, Inc. (NASDAQ:DZSI) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately DZSI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); DZSI investors were disappointed as the stock returned -29.5% 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.