The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Daqo New Energy Corp (NYSE:DQ) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Daqo New Energy Corp (NYSE:DQ) has seen an increase in hedge fund sentiment of late. DQ was in 10 hedge funds’ portfolios at the end of the third quarter of 2019. There were 6 hedge funds in our database with DQ holdings at the end of the previous quarter. Our calculations also showed that DQ isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are many tools stock traders can use to value their holdings. A duo of the most underrated tools are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can outpace the S&P 500 by a superb amount (see the details here).
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the recent hedge fund action surrounding Daqo New Energy Corp (NYSE:DQ).
Hedge fund activity in Daqo New Energy Corp (NYSE:DQ)
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 67% from the second quarter of 2019. By comparison, 6 hedge funds held shares or bullish call options in DQ a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Arosa Capital Management was the largest shareholder of Daqo New Energy Corp (NYSE:DQ), with a stake worth $5.3 million reported as of the end of September. Trailing Arosa Capital Management was Sensato Capital Management, which amassed a stake valued at $5.1 million. Millennium Management, Renaissance Technologies, and Granite Point Capital 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 Sensato Capital Management allocated the biggest weight to Daqo New Energy Corp (NYSE:DQ), around 1.93% of its 13F portfolio. Arosa Capital Management is also relatively very bullish on the stock, designating 0.95 percent of its 13F equity portfolio to DQ.
With a general bullishness amongst the heavyweights, some big names have jumped into Daqo New Energy Corp (NYSE:DQ) headfirst. Millennium Management, managed by Israel Englander, established the most outsized position in Daqo New Energy Corp (NYSE:DQ). Millennium Management had $5 million invested in the company at the end of the quarter. Renaissance Technologies also made a $2.9 million investment in the stock during the quarter. The following funds were also among the new DQ investors: David Harding’s Winton Capital Management, Steve Cohen’s Point72 Asset Management, and David E. Shaw’s D E Shaw.
Let’s also examine hedge fund activity in other stocks similar to Daqo New Energy Corp (NYSE:DQ). These stocks are DXP Enterprises Inc (NASDAQ:DXPE), Quanterix Corporation (NASDAQ:QTRX), America’s Car-Mart, Inc. (NASDAQ:CRMT), and Everi Holdings Inc (NYSE:EVRI). This group of stocks’ market caps match DQ’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DXPE | 9 | 63404 | -2 |
| QTRX | 10 | 42340 | 2 |
| CRMT | 21 | 87866 | -2 |
| EVRI | 23 | 164371 | -1 |
| Average | 15.75 | 89495 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $89 million. That figure was $21 million in DQ’s case. Everi Holdings Inc (NYSE:EVRI) is the most popular stock in this table. On the other hand DXP Enterprises Inc (NASDAQ:DXPE) is the least popular one with only 9 bullish hedge fund positions. Daqo New Energy Corp (NYSE:DQ) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately DQ wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); DQ investors were disappointed as the stock returned -17.4% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
