Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Driven Brands Holdings Inc. (NASDAQ:DRVN) to find out whether there were any major changes in hedge funds’ views.
Is DRVN a good stock to buy? Investors who are in the know were taking an optimistic view. The number of long hedge fund positions improved by 18 lately. Driven Brands Holdings Inc. (NASDAQ:DRVN) was in 18 hedge funds’ portfolios at the end of March. Our calculations also showed that DRVN 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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Ken Griffin of Citadel Investment Group
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 look at the fresh hedge fund action surrounding Driven Brands Holdings Inc. (NASDAQ:DRVN).
Do Hedge Funds Think DRVN Is A Good Stock To Buy Now?
At the end of March, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18 from the previous quarter. The graph below displays the number of hedge funds with bullish position in DRVN over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Driven Brands Holdings Inc. (NASDAQ:DRVN) was held by Darsana Capital Partners, which reported holding $30.2 million worth of stock at the end of December. It was followed by Woodson Capital Management with a $17.5 million position. Other investors bullish on the company included Citadel Investment Group, Alyeska Investment Group, and Cinctive Capital Management. In terms of the portfolio weights assigned to each position Stormborn Capital Management allocated the biggest weight to Driven Brands Holdings Inc. (NASDAQ:DRVN), around 2.36% of its 13F portfolio. Woodson Capital Management is also relatively very bullish on the stock, earmarking 1.31 percent of its 13F equity portfolio to DRVN.
Now, some big names were leading the bulls’ herd. Darsana Capital Partners, managed by Anand Desai, initiated the most outsized position in Driven Brands Holdings Inc. (NASDAQ:DRVN). Darsana Capital Partners had $30.2 million invested in the company at the end of the quarter. James Woodson Davis’s Woodson Capital Management also made a $17.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group, Anand Parekh’s Alyeska Investment Group, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Driven Brands Holdings Inc. (NASDAQ:DRVN) but similarly valued. We will take a look at Portland General Electric Company (NYSE:POR), PS Business Parks Inc (NYSE:PSB), Chesapeake Energy Corporation (NYSE:CHK), Teradata Corporation (NYSE:TDC), John Bean Technologies Corporation (NYSE:JBT), AdaptHealth Corp. (NASDAQ:AHCO), and World Wrestling Entertainment, Inc. (NYSE:WWE). All of these stocks’ market caps are similar to DRVN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| POR | 21 | 68488 | 2 |
| PSB | 12 | 112420 | -3 |
| CHK | 42 | 1821541 | 42 |
| TDC | 26 | 480526 | 0 |
| JBT | 21 | 157661 | 8 |
| AHCO | 17 | 306527 | -6 |
| WWE | 25 | 256023 | -4 |
| Average | 23.4 | 457598 | 5.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.4 hedge funds with bullish positions and the average amount invested in these stocks was $458 million. That figure was $138 million in DRVN’s case. Chesapeake Energy Corporation (NYSE:CHK) is the most popular stock in this table. On the other hand PS Business Parks Inc (NYSE:PSB) is the least popular one with only 12 bullish hedge fund positions. Driven Brands Holdings Inc. (NASDAQ:DRVN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DRVN is 26. 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 28.5% in 2021 through July 23rd and beat the market by 10.1 percentage points. A small number of hedge funds were also right about betting on DRVN, though not to the same extent, as the stock returned 21.8% since the end of Q1 (through July 23rd) and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.
