Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Dimension Therapeutics Inc (NASDAQ:DMTX) .
Dimension Therapeutics Inc (NASDAQ:DMTX) has seen a decrease in hedge fund interest in recent months. DMTX was in 7 hedge funds’ portfolios at the end of the third quarter of 2016. There were 8 hedge funds in our database with DMTX 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 Paragon Commercial Corp (NASDAQ:PBNC), Quantum Corp (NYSE:QTM), and Independence Contract Drilling Inc (NYSE:ICD) to gather more data points.
Follow Dimension Therapeutics Inc.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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With all of this in mind, let’s take a look at the new action encompassing Dimension Therapeutics Inc (NASDAQ:DMTX).
How have hedgies been trading Dimension Therapeutics Inc (NASDAQ:DMTX)?
Heading into the fourth quarter of 2016, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DMTX over the last 5 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Samuel Isaly’s OrbiMed Advisors has the number one position in Dimension Therapeutics Inc (NASDAQ:DMTX), worth close to $43.1 million. Coming in second is Peter Kolchinsky of RA Capital Management, with a $12.4 million position; 1.3% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions include Julian Baker and Felix Baker’s Baker Bros. Advisors, Christopher James’ Partner Fund Management and Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Highbridge Capital Management. 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 DMTX as a viable investment and initiated a position in the stock.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Dimension Therapeutics Inc (NASDAQ:DMTX) but similarly valued. We will take a look at Paragon Commercial Corp (NASDAQ:PBNC), Quantum Corp (NYSE:QTM), Independence Contract Drilling Inc (NYSE:ICD), and Blackstone/GSO Long-Short Credit Income (NYSE:BGX). This group of stocks’ market values are similar to DMTX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PBNC | 4 | 8031 | 0 |
| QTM | 15 | 42885 | 0 |
| ICD | 11 | 15965 | -3 |
| BGX | 3 | 21422 | 0 |
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $22 million. That figure was $71 million in DMTX’s case. Quantum Corp (NYSE:QTM) is the most popular stock in this table. On the other hand Blackstone/GSO Long-Short Credit Income (NYSE:BGX) is the least popular one with only 3 bullish hedge fund positions. Dimension Therapeutics Inc (NASDAQ:DMTX) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard QTM might be a better candidate to consider taking a long position in.
Disclosure: None
