“Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value,” are the words of Maran Capital’s Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Dana Incorporated (NYSE:DAN) and see how it was affected.
Is Dana Incorporated (NYSE:DAN) a good stock to buy now? Money managers are turning bullish. The number of long hedge fund bets improved by 5 in recent months. Our calculations also showed that DAN isn’t among the 30 most popular stocks among hedge funds. DAN was in 28 hedge funds’ portfolios at the end of the third quarter of 2018. There were 23 hedge funds in our database with DAN holdings at the end of the previous quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to the beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Cliff Asness of AQR Capital Management
We’re going to check out the new hedge fund action encompassing Dana Incorporated (NYSE:DAN).
What have hedge funds been doing with Dana Incorporated (NYSE:DAN)?
At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from the second quarter of 2018. On the other hand, there were a total of 22 hedge funds with a bullish position in DAN at the beginning of this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Anchor Bolt Capital was the largest shareholder of Dana Incorporated (NYSE:DAN), with a stake worth $83.5 million reported as of the end of September. Trailing Anchor Bolt Capital was Citadel Investment Group, which amassed a stake valued at $70.4 million. GAMCO Investors, AQR Capital Management, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, key money managers were leading the bulls’ herd. First Pacific Advisors LLC, managed by Robert Rodriguez and Steven Romick, created the biggest position in Dana Incorporated (NYSE:DAN). First Pacific Advisors LLC had $19.4 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $13.8 million position during the quarter. The other funds with new positions in the stock are Anand Parekh’s Alyeska Investment Group, Ilya Boroditsky’s Precision Path Capital, and Gregg Moskowitz’s Interval Partners.
Let’s also examine hedge fund activity in other stocks similar to Dana Incorporated (NYSE:DAN). We will take a look at Liberty Expedia Holdings, Inc. (NASDAQ:LEXEA), Quaker Chemical Corp (NYSE:KWR), Weatherford International plc (NYSE:WFT), and TreeHouse Foods Inc. (NYSE:THS). All of these stocks’ market caps are similar to DAN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LEXEA | 24 | 324656 | 8 |
| KWR | 11 | 163173 | 3 |
| WFT | 21 | 362168 | -5 |
| THS | 18 | 257934 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $277 million. That figure was $468 million in DAN’s case. Liberty Expedia Holdings, Inc. (NASDAQ:LEXEA) is the most popular stock in this table. On the other hand Quaker Chemical Corp (NYSE:KWR) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Dana Incorporated (NYSE:DAN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
