In this article we will take a look at whether hedge funds think DLH Holdings Corp. (NASDAQ:DLHC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
DLH Holdings Corp. (NASDAQ:DLHC) has experienced an increase in activity from the world’s largest hedge funds in recent months. DLH Holdings Corp. (NASDAQ:DLHC) was in 8 hedge funds’ portfolios at the end of September. The all time high for this statistics is 7. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 5 hedge funds in our database with DLHC holdings at the end of June. Our calculations also showed that DLHC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most investors, hedge funds are viewed as unimportant, old financial tools of yesteryear. While there are greater than 8000 funds trading today, We look at the moguls of this club, approximately 850 funds. These hedge fund managers control most of the hedge fund industry’s total capital, and by observing their highest performing stock picks, Insider Monkey has unearthed several investment strategies that have historically outstripped the broader indices. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
Fred DiSanto of Ancora Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s take a look at the fresh hedge fund action surrounding DLH Holdings Corp. (NASDAQ:DLHC).
What does smart money think about DLH Holdings Corp. (NASDAQ:DLHC)?
At the end of September, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 60% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DLHC over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Wynnefield Capital was the largest shareholder of DLH Holdings Corp. (NASDAQ:DLHC), with a stake worth $28.1 million reported as of the end of September. Trailing Wynnefield Capital was Renaissance Technologies, which amassed a stake valued at $3.4 million. Cove Street Capital, Minerva Advisors, and Ancora Advisors 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 Wynnefield Capital allocated the biggest weight to DLH Holdings Corp. (NASDAQ:DLHC), around 17.47% of its 13F portfolio. Minerva Advisors is also relatively very bullish on the stock, dishing out 0.61 percent of its 13F equity portfolio to DLHC.
As industrywide interest jumped, some big names were breaking ground themselves. Ancora Advisors, managed by Frederick DiSanto, assembled the most outsized position in DLH Holdings Corp. (NASDAQ:DLHC). Ancora Advisors had $0.6 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.1 million investment in the stock during the quarter. The only other fund with a brand new DLHC position is Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as DLH Holdings Corp. (NASDAQ:DLHC) but similarly valued. These stocks are Phoenix New Media Ltd (NYSE:FENG), Electromed, Inc. (NYSE:ELMD), Peoples Bancorp of North Carolina, Inc. (NASDAQ:PEBK), PAVmed Inc. (NASDAQ:PAVM), Beyond Air, Inc. (NASDAQ:XAIR), Dynagas LNG Partners LP (NYSE:DLNG), and 22nd Century Group, Inc (NYSE:XXII). This group of stocks’ market valuations are similar to DLHC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FENG | 8 | 4029 | 2 |
| ELMD | 6 | 5692 | 2 |
| PEBK | 2 | 3804 | -1 |
| PAVM | 5 | 1137 | 2 |
| XAIR | 1 | 2652 | -3 |
| DLNG | 1 | 153 | 0 |
| XXII | 4 | 546 | -4 |
| Average | 3.9 | 2573 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.9 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $36 million in DLHC’s case. Phoenix New Media Ltd (NYSE:FENG) is the most popular stock in this table. On the other hand Beyond Air, Inc. (NASDAQ:XAIR) is the least popular one with only 1 bullish hedge fund positions. DLH Holdings Corp. (NASDAQ:DLHC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DLHC is 88. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on DLHC as the stock returned 37.9% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
