Is Diamond Hill Investment Group, Inc. (DHIL) Going to Burn These Hedge Funds?

Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the 12-month period ending October 30. However, 63% of hedge funds’ top 30 stock picks from the index did beat the market, and returned nearly twice as much on average as the index. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.

Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) investors should pay attention to a decrease in hedge fund sentiment in recent months. DHIL was in 5 hedge funds’ portfolios at the end of September. There were 7 hedge funds in our database with DHIL positions at the end of the previous quarter. 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 Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH), Dime Community Bancshares, Inc. (NASDAQ:DCOM), and SJW Corp. (NYSE:SJW) to gather more data points.

Now, let’s check out the recent action encompassing Diamond Hill Investment Group, Inc. (NASDAQ:DHIL).

What does the smart money think about Diamond Hill Investment Group, Inc. (NASDAQ:DHIL)?

At Q3’s end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from one quarter earlier. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the most valuable position in Diamond Hill Investment Group, Inc. (NASDAQ:DHIL). Royce & Associates has a $34.1 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Charles Akre of Akre Capital Management, with a $27.1 million position; 0.6% of its 13F portfolio is allocated to the company. Other peers that hold long positions consist of Jim Simons’s Renaissance Technologies, Cliff Asness’s AQR Capital Management and John Overdeck and David Siegel’s Two Sigma Advisors.

Seeing as Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) has witnessed a declination in interest from hedge fund managers, it’s safe to say that there is a sect of funds that elected to cut their positions entirely last quarter. It’s worth mentioning that Neil Chriss’ Hutchin Hill Capital said goodbye to the biggest stake of all the hedgies followed by Insider Monkey, comprising an estimated $0.3 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dropped about $0.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 2 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) but similarly valued. These stocks are Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH), Dime Community Bancshares, Inc. (NASDAQ:DCOM), SJW Corp. (NYSE:SJW), and Transportadora de Gas del Sur SA (ADR) (NYSE:TGS). This group of stocks’ market values resemble DHIL’s market value.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $75 million in DHIL’s case. Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) is the most popular stock in this table. On the other hand Transportadora de Gas del Sur SA (ADR) (NYSE:TGS) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) is even less popular than TGS. 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.