It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Dominion Diamond Corp (NYSE:DDC).
Hedge fund interest in Dominion Diamond Corp (NYSE:DDC) shares was flat at the end of last quarter, and there were 14 hedge funds with DDC holdings. This is usually a negative indicator. At the end of this article we will also compare DDC to other stocks including Babcock & Wilcox Enterprises Inc (NYSE:BW), Five9 Inc (NASDAQ:FIVN), and Flotek Industries Inc (NYSE:FTK) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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What does the smart money think about Dominion Diamond Corp (NYSE:DDC)?
Heading into the fourth quarter of 2016, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DDC over the last 5 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, has the largest position in Dominion Diamond Corp (NYSE:DDC), worth close to $22.7 million. On Renaissance Technologies’ heels is Sprott Asset Management, led by Eric Sprott, holding a $13 million position. Other hedge funds and institutional investors that are bullish consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Mark Travis’ Intrepid Capital Management and D. E. Shaw’s D E Shaw. We should note that two of these hedge funds (Sprott Asset Management and Intrepid Capital Management) are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Because Dominion Diamond Corp (NYSE:DDC) has sustained declining sentiment from the smart money, we can see that there was a specific group of fund managers that decided to sell off their positions entirely in the third quarter. Interestingly, Seth Fischer’s Oasis Managementá dumped the biggest investment of all the hedgies followed by Insider Monkey, totaling close to $2.4 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also dropped its stock, about $0.1 million worth.
Let’s also examine hedge fund activity in other stocks similar to Dominion Diamond Corp (NYSE:DDC). We will take a look at Babcock & Wilcox Enterprises Inc (NYSE:BW), Five9 Inc (NASDAQ:FIVN), Flotek Industries Inc (NYSE:FTK), and Deltic Timber Corp (NYSE:DEL). This group of stocks’ market valuations match DDC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BW | 20 | 198761 | 0 |
| FIVN | 23 | 116555 | 7 |
| FTK | 16 | 167644 | 5 |
| DEL | 4 | 135423 | 0 |
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $155 million. That figure was $73 million in DDC’s case. Five9 Inc (NASDAQ:FIVN) is the most popular stock in this table. On the other hand Deltic Timber Corp (NYSE:DEL) is the least popular one with only 4 bullish hedge fund positions. Dominion Diamond Corp (NYSE:DDC) 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 FIVN might be a better candidate to consider taking a long position in.
Disclosure: None
