How do we determine whether DHX Media Ltd (USA) (NASDAQ:DHXM) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is DHX Media Ltd (USA) a bargain? The best stock pickers are selling. The number of long hedge fund bets were cut by 1 lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Relypsa Inc (NASDAQ:RLYP), Inter Parfums, Inc. (NASDAQ:IPAR), and K2M Group Holdings Inc (NASDAQ:KTWO) to gather more data points.
With all of this in mind, we’re going to go over the recent action regarding DHX Media Ltd (USA) (NASDAQ:DHXM).
How are hedge funds trading DHX Media Ltd (USA) (NASDAQ:DHXM)?
At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Christian Leone’s Luxor Capital Group has the largest position in DHX Media Ltd (USA) (NASDAQ:DHXM), worth close to $97.2 million, comprising 2.2% of its total 13F portfolio. The second largest stake is held by Debra Fine of Fine Capital Partners, with a $30.7 million position; 3% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions encompass Jonathan Lennon’s Pleasant Lake Partners, Adam Wright and Gary Kohler’s Blue Clay Capital and Mark N. Diker’s Diker Management.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Meru Capital. 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 none of the 700+ hedge funds tracked by Insider Monkey identified DHXM as a viable investment and initiated a position in the stock.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as DHX Media Ltd (USA) (NASDAQ:DHXM) but similarly valued. These stocks are Relypsa Inc (NASDAQ:RLYP), Inter Parfums, Inc. (NASDAQ:IPAR), K2M Group Holdings Inc (NASDAQ:KTWO), and James River Group Holdings Ltd (NASDAQ:JRVR). This group of stocks’ market values are similar to DHXM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RLYP | 25 | 311230 | -3 |
| IPAR | 6 | 19743 | -5 |
| KTWO | 11 | 44503 | 2 |
| JRVR | 13 | 448703 | 4 |
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $206 million. That figure was $140 million in DHXM’s case. Relypsa Inc (NASDAQ:RLYP) is the most popular stock in this table. On the other hand Inter Parfums, Inc. (NASDAQ:IPAR) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks DHX Media Ltd (USA) (NASDAQ:DHXM) is even less popular than IPAR. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.