The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Dime Community Bancshares, Inc. (NASDAQ:DCOM) from the perspective of those successful funds.
Dime Community Bancshares, Inc. (NASDAQ:DCOM) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 8 hedge funds’ portfolios at the end of the third quarter of 2016. At the end of this article we will also compare DCOM to other stocks including Richmont Mines Inc. (USA) (NYSEAMEX:RIC), Cass Information Systems (NASDAQ:CASS), and Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) to get a better sense of its popularity.
Follow Dime Community Bancshares Inc (NASDAQ:DCOM)
Follow Dime Community Bancshares Inc (NASDAQ:DCOM)
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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With all of this in mind, let’s check out the new action encompassing Dime Community Bancshares, Inc. (NASDAQ:DCOM).
How have hedgies been trading Dime Community Bancshares, Inc. (NASDAQ:DCOM)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in DCOM heading into this year. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Bernard Horn’s Polaris Capital Management has the number one position in Dime Community Bancshares, Inc. (NASDAQ:DCOM), worth close to $13.8 million, accounting for 1.1% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, one of the largest hedge funds in the world, with a $9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions include Cliff Asness’s AQR Capital Management, Israel Englander’s Millennium Management and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds 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.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: McKinley Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Highbridge Capital Management).
Let’s go over hedge fund activity in other stocks similar to Dime Community Bancshares, Inc. (NASDAQ:DCOM). We will take a look at Richmont Mines Inc. (USA) (NYSEAMEX:RIC), Cass Information Systems (NASDAQ:CASS), Diamond Hill Investment Group, Inc. (NASDAQ:DHIL), and EPIQ Systems, Inc. (NASDAQ:EPIQ). This group of stocks’ market valuations resemble DCOM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RIC | 9 | 74547 | 0 |
| CASS | 5 | 8387 | -1 |
| DHIL | 5 | 63669 | -1 |
| EPIQ | 9 | 115942 | -2 |
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $33 million in DCOM’s case. Richmont Mines Inc. (USA) (NYSEAMEX:RIC) is the most popular stock in this table. On the other hand Cass Information Systems (NASDAQ:CASS) is the least popular one with only 5 bullish hedge fund positions. Dime Community Bancshares, Inc. (NASDAQ:DCOM) 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. In this regard RIC might be a better candidate to consider taking a long position in.
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Disclosure: None
