In this article we will check out the progression of hedge fund sentiment towards Digital Ally, Inc. (NASDAQ:DGLY) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is DGLY a good stock to buy? Digital Ally, Inc. (NASDAQ:DGLY) was in 4 hedge funds’ portfolios at the end of March. The all time high for this statistic is 3. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. DGLY shareholders have witnessed an increase in support from the world’s most elite money managers in recent months. There were 1 hedge funds in our database with DGLY positions at the end of the fourth quarter. Our calculations also showed that DGLY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Michael Gelband of ExodusPoint Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $27 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to take a glance at the key hedge fund action encompassing Digital Ally, Inc. (NASDAQ:DGLY).
Do Hedge Funds Think DGLY Is A Good Stock To Buy Now?
At Q1’s end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 300% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in DGLY a year ago. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Hal Mintz’s Sabby Capital has the biggest position in Digital Ally, Inc. (NASDAQ:DGLY), worth close to $1.1 million, comprising 0.2% of its total 13F portfolio. The second largest stake is held by Citadel Investment Group, led by Ken Griffin, holding a $0.4 million call position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions encompass Michael Gelband’s ExodusPoint Capital, and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Sabby Capital allocated the biggest weight to Digital Ally, Inc. (NASDAQ:DGLY), around 0.22% of its 13F portfolio. Sabby Capital is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to DGLY.
As one would reasonably expect, specific money managers were leading the bulls’ herd. Sabby Capital, managed by Hal Mintz, initiated the biggest position in Digital Ally, Inc. (NASDAQ:DGLY). Sabby Capital had $1.1 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $0.1 million position during the quarter. The other funds with brand new DGLY positions are Hal Mintz’s Sabby Capital and Israel Englander’s Millennium Management.
Let’s check out hedge fund activity in other stocks similar to Digital Ally, Inc. (NASDAQ:DGLY). We will take a look at Nephros, Inc. (NASDAQ:NEPH), Salarius Pharmaceuticals, Inc. (NASDAQ:SLRX), Canterbury Park Holding Corporation (NASDAQ:CPHC), NCS Multistage Holdings, Inc. (NASDAQ:NCSM), Bioline RX Ltd (NASDAQ:BLRX), MMTec, Inc. (NASDAQ:MTC), and Fujian Blue Hat Interactive Entertainment Technology (NASDAQ:BHAT). All of these stocks’ market caps resemble DGLY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NEPH | 5 | 27704 | 0 |
| SLRX | 8 | 13352 | 5 |
| CPHC | 1 | 5460 | 0 |
| NCSM | 1 | 225 | 1 |
| BLRX | 6 | 11077 | 1 |
| MTC | 4 | 4122 | 2 |
| BHAT | 3 | 1068 | 1 |
| Average | 4 | 9001 | 1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $1 million in DGLY’s case. Salarius Pharmaceuticals, Inc. (NASDAQ:SLRX) is the most popular stock in this table. On the other hand Canterbury Park Holding Corporation (NASDAQ:CPHC) is the least popular one with only 1 bullish hedge fund positions. Digital Ally, Inc. (NASDAQ:DGLY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DGLY is 59.4. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on DGLY as the stock returned 19.6% since the end of the first quarter (through 6/11) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
