Hedge funds are not perfect. They have their bad picks just like everyone else. Micron, a stock hedge funds have loved, lost 50% during the last 12 months ending in October 30. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% in the same time period, vs. a gain of 5.2% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Destination Maternity Corp (NASDAQ:DEST).
Is Destination Maternity Corp (NASDAQ:DEST) undervalued? The smart money is taking a bearish view. The number of long hedge fund bets fell by 2 in recent months. DEST was in 11 hedge funds’ portfolios at the end of the third quarter of 2015. There were 13 hedge funds in our database with DEST positions at the end of the previous quarter. At the end of this article we will also compare DEST to other stocks, including Southern First Bancshares, Inc. (NASDAQ:SFST), L.B. Foster Company (NASDAQ:FSTR), and Summit Therapeutics PLC (ADR) (NASDAQ:SMMT) to get a better sense of its popularity.
Follow Destination Maternity Corp (NASDAQ:DEST)
Follow Destination Maternity Corp (NASDAQ:DEST)
At the moment there are tons of methods market participants have at their disposal to value publicly traded companies. Some of the most under-the-radar methods are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can outclass the market by a solid amount (see the details here).
Now, we’re going to view the fresh action regarding Destination Maternity Corp (NASDAQ:DEST).
What does the smart money think about Destination Maternity Corp (NASDAQ:DEST)?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the previous quarter. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the biggest position in Destination Maternity Corp (NASDAQ:DEST). Royce & Associates has a $13.7 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Jim Simons of Renaissance Technologies, 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 are bullish comprise George McCabe’s Portolan Capital Management, Andy Redleaf’s Whitebox Advisors and Steve Tannenbaum’s Greenwood Investments.
Because Destination Maternity Corp (NASDAQ:DEST) has faced a declination in interest from the entirety of the hedge funds we track, logic holds that there exists a select few hedge funds that decided to sell off their positions entirely last quarter. It’s worth mentioning that Cliff Asness’s AQR Capital Management said goodbye to the largest investment of the 700 funds monitored by Insider Monkey, worth close to $0.4 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund cut about $0.3 million worth of shares. These transactions are interesting, as aggregate hedge fund interest dropped by 2 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to Destination Maternity Corp (NASDAQ:DEST). These stocks are Southern First Bancshares, Inc. (NASDAQ:SFST), L.B. Foster Company (NASDAQ:FSTR), Summit Therapeutics PLC (ADR) (NASDAQ:SMMT), and Cenveo, Inc. (NYSE:CVO). This group of stocks’ market caps match DEST’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SFST | 4 | 20438 | 0 |
| FSTR | 14 | 16795 | -3 |
| SMMT | 4 | 22407 | 0 |
| CVO | 9 | 16715 | -3 |
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. L.B. Foster Company (NASDAQ:FSTR) is the most popular stock in this table with 14 funds holding shares. On the other hand Southern First Bancshares, Inc. (NASDAQ:SFST) is the least popular one. With hedge funds holding stakes worth $31 million in aggregate, Destination Maternity Corp (NASDAQ:DEST) 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 FSTR might be a better candidate to consider a long position.
