We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Diana Shipping Inc. (NYSE:DSX).
Is Diana Shipping (DSX) a good stock to buy now? DSX shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds’ portfolios at the end of September. Our calculations also showed that DSX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare DSX to other stocks including vTv Therapeutics Inc (NASDAQ:VTVT), Olympic Steel, Inc. (NASDAQ:ZEUS), and Applied Genetic Technologies Corp (NASDAQ:AGTC) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Iben of Kopernik Global Investors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s review the key hedge fund action surrounding Diana Shipping Inc. (NYSE:DSX).
Hedge fund activity in Diana Shipping Inc. (NYSE:DSX)
Heading into the fourth quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2020. By comparison, 10 hedge funds held shares or bullish call options in DSX 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, Kopernik Global Investors was the largest shareholder of Diana Shipping Inc. (NYSE:DSX), with a stake worth $8.4 million reported as of the end of September. Trailing Kopernik Global Investors was Hosking Partners, which amassed a stake valued at $8.4 million. Renaissance Technologies, 12 West Capital Management, and 683 Capital Partners 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 Kopernik Global Investors allocated the biggest weight to Diana Shipping Inc. (NYSE:DSX), around 1.31% of its 13F portfolio. Hosking Partners is also relatively very bullish on the stock, dishing out 0.26 percent of its 13F equity portfolio to DSX.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Diana Shipping Inc. (NYSE:DSX) but similarly valued. These stocks are vTv Therapeutics Inc (NASDAQ:VTVT), Olympic Steel, Inc. (NASDAQ:ZEUS), Applied Genetic Technologies Corp (NASDAQ:AGTC), Protalix BioTherapeutics Inc. (NYSE:PLX), Barnes & Noble Education Inc (NYSE:BNED), Citizens Holding Company (NASDAQ:CIZN), and Target Hospitality Corp. (NASDAQ:TH). This group of stocks’ market caps are closest to DSX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VTVT | 4 | 2795 | 1 |
| ZEUS | 5 | 3338 | -1 |
| AGTC | 11 | 25666 | 3 |
| PLX | 3 | 11491 | -1 |
| BNED | 11 | 13375 | -1 |
| CIZN | 1 | 787 | 0 |
| TH | 13 | 8350 | -2 |
| Average | 6.9 | 9400 | -0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.9 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $19 million in DSX’s case. Target Hospitality Corp. (NASDAQ:TH) is the most popular stock in this table. On the other hand Citizens Holding Company (NASDAQ:CIZN) is the least popular one with only 1 bullish hedge fund positions. Diana Shipping Inc. (NYSE:DSX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DSX is 46.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on DSX as the stock returned 19.9% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
