Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by 4 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Digi International Inc. (NASDAQ:DGII) from the perspective of those elite funds.
Digi International Inc. (NASDAQ:DGII) has seen a decrease in enthusiasm from smart money in recent months. Our calculations also showed that DGII isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most stock holders, hedge funds are seen as unimportant, outdated investment vehicles of yesteryear. While there are greater than 8000 funds in operation today, Our researchers look at the upper echelon of this group, around 750 funds. These money managers orchestrate most of the hedge fund industry’s total capital, and by monitoring their finest stock picks, Insider Monkey has determined a few investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. We’re going to check out the fresh hedge fund action encompassing Digi International Inc. (NASDAQ:DGII).
What have hedge funds been doing with Digi International Inc. (NASDAQ:DGII)?
At the end of the second quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in DGII a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
The largest stake in Digi International Inc. (NASDAQ:DGII) was held by Royce & Associates, which reported holding $12.9 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $9.8 million position. Other investors bullish on the company included North Run Capital, AQR Capital Management, and Arrowstreet Capital.
Seeing as Digi International Inc. (NASDAQ:DGII) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there is a sect of money managers who were dropping their positions entirely by the end of the second quarter. At the top of the heap, Constantinos J. Christofilis’s Archon Capital Management dropped the largest stake of the 750 funds watched by Insider Monkey, totaling about $0.9 million in stock. David Harding’s fund, Winton Capital Management, also dumped its stock, about $0.5 million worth. These moves are important to note, as total hedge fund interest dropped by 2 funds by the end of the second quarter.
Let’s check out hedge fund activity in other stocks similar to Digi International Inc. (NASDAQ:DGII). We will take a look at Neptune Wellness Solutions Inc. (NASDAQ:NEPT), KalVista Pharmaceuticals, Inc. (NASDAQ:KALV), Fiesta Restaurant Group Inc (NASDAQ:FRGI), and PCSB Financial Corporation (NASDAQ:PCSB). This group of stocks’ market values match DGII’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NEPT | 8 | 32369 | 0 |
| KALV | 15 | 118797 | -4 |
| FRGI | 14 | 118168 | -4 |
| PCSB | 10 | 28399 | 1 |
| Average | 11.75 | 74433 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $47 million in DGII’s case. KalVista Pharmaceuticals, Inc. (NASDAQ:KALV) is the most popular stock in this table. On the other hand Neptune Wellness Solutions Inc. (NASDAQ:NEPT) is the least popular one with only 8 bullish hedge fund positions. Digi International Inc. (NASDAQ:DGII) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on DGII as the stock returned 7.4% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
