In this article we will check out the progression of hedge fund sentiment towards Dolby Laboratories, Inc. (NYSE:DLB) 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.
Dolby Laboratories, Inc. (NYSE:DLB) was in 29 hedge funds’ portfolios at the end of March. DLB investors should pay attention to a decrease in support from the world’s most elite money managers lately. There were 31 hedge funds in our database with DLB holdings at the end of the previous quarter. Our calculations also showed that DLB isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Today there are a lot of formulas investors have at their disposal to analyze publicly traded companies. A couple of the most underrated formulas are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the elite money managers can beat the S&P 500 by a healthy margin (see the details here).
Michael Price of MFP Investors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one as well as this tiny lithium play. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a peek at the latest hedge fund action surrounding Dolby Laboratories, Inc. (NYSE:DLB).
How have hedgies been trading Dolby Laboratories, Inc. (NYSE:DLB)?
Heading into the second quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DLB over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the number one position in Dolby Laboratories, Inc. (NYSE:DLB). Renaissance Technologies has a $109.8 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Nantahala Capital Management, managed by Wilmot B. Harkey and Daniel Mack, which holds a $45.4 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions encompass Ed Bosek’s BeaconLight Capital, Brian Ashford-Russell and Tim Woolley’s Polar Capital and Michael Price’s MFP Investors. In terms of the portfolio weights assigned to each position BeaconLight Capital allocated the biggest weight to Dolby Laboratories, Inc. (NYSE:DLB), around 8.3% of its 13F portfolio. Trigran Investments is also relatively very bullish on the stock, earmarking 6.22 percent of its 13F equity portfolio to DLB.
Due to the fact that Dolby Laboratories, Inc. (NYSE:DLB) has experienced declining sentiment from the smart money, it’s easy to see that there was a specific group of hedge funds who sold off their positions entirely in the first quarter. Interestingly, Bijan Modanlou, Joseph Bou-Saba, and Jayaveera Kodali’s Alta Park Capital dropped the largest position of the 750 funds tracked by Insider Monkey, valued at an estimated $26.7 million in stock. Donald Sussman’s fund, Paloma Partners, also sold off its stock, about $3.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 2 funds in the first quarter.
Let’s go over hedge fund activity in other stocks similar to Dolby Laboratories, Inc. (NYSE:DLB). These stocks are Bausch Health Companies (NYSE:BHC), Mohawk Industries, Inc. (NYSE:MHK), Ally Financial Inc (NYSE:ALLY), and Whirlpool Corporation (NYSE:WHR). This group of stocks’ market caps are closest to DLB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BHC | 35 | 1566790 | 4 |
| MHK | 36 | 585591 | -4 |
| ALLY | 45 | 931554 | -9 |
| WHR | 25 | 567352 | -3 |
| Average | 35.25 | 912822 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.25 hedge funds with bullish positions and the average amount invested in these stocks was $913 million. That figure was $374 million in DLB’s case. Ally Financial Inc (NYSE:ALLY) is the most popular stock in this table. On the other hand Whirlpool Corporation (NYSE:WHR) is the least popular one with only 25 bullish hedge fund positions. Dolby Laboratories, Inc. (NYSE:DLB) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately DLB wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); DLB investors were disappointed as the stock returned 12.5% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
