Is DXYN Stock A Buy?

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 The Dixie Group Inc (NASDAQ:DXYN) to find out whether there were any major changes in hedge funds’ views.

Is DXYN stock a buy? The Dixie Group Inc (NASDAQ:DXYN) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that DXYN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). 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 Indonesia Energy Corporation Limited (NYSE:INDO), China Hgs Real Estate Inc (NASDAQ:HGSH), and Income Opportunity Realty Investors, Inc. (NYSE:IOR) to gather more data points.

In the 21st century investor’s toolkit there are numerous gauges stock market investors use to value stocks. Two of the most useful gauges are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can trounce the broader indices by a very impressive margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Jeffrey Gendell of Tontine Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 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 let’s check out the latest hedge fund action regarding The Dixie Group Inc (NASDAQ:DXYN).

Do Hedge Funds Think DXYN Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in DXYN over the last 23 quarters. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Tontine Asset Management, managed by Jeffrey Gendell, holds the most valuable position in The Dixie Group Inc (NASDAQ:DXYN). Tontine Asset Management has a $4.1 million position in the stock, comprising 0.4% of its 13F portfolio. The second most bullish fund manager is Chuck Royce of Royce & Associates, with a $2.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism contain Renaissance Technologies, Ken Griffin’s Citadel Investment Group and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Tontine Asset Management allocated the biggest weight to The Dixie Group Inc (NASDAQ:DXYN), around 0.44% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to DXYN.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: 999. 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 only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).

Let’s also examine hedge fund activity in other stocks similar to The Dixie Group Inc (NASDAQ:DXYN). These stocks are Indonesia Energy Corporation Limited (NYSE:INDO), China Hgs Real Estate Inc (NASDAQ:HGSH), Income Opportunity Realty Investors, Inc. (NYSE:IOR), Sintx Technologies, Inc. (NASDAQ:SINT), BSQUARE Corporation (NASDAQ:BSQR), RiceBran Technologies (NASDAQ:RIBT), and Hudson Global Inc (NASDAQ:HSON). This group of stocks’ market caps match DXYN’s market cap.

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As you can see these stocks had an average of 2.1 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $7 million in DXYN’s case. RiceBran Technologies (NASDAQ:RIBT) is the most popular stock in this table. On the other hand Income Opportunity Realty Investors, Inc. (NYSE:IOR) is the least popular one with only 1 bullish hedge fund positions. The Dixie Group Inc (NASDAQ:DXYN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DXYN is 72.5. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 beat the market again by 3.3 percentage points. Unfortunately DXYN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on DXYN were disappointed as the stock returned -12.5% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.