Should I Avoid Dorchester Minerals LP (DMLP)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 866 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their March 31st holdings, data that is available nowhere else. Should you consider Dorchester Minerals LP (NASDAQ:DMLP) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is Dorchester Minerals LP (NASDAQ:DMLP) the right investment to pursue these days? Investors who are in the know were getting less bullish. The number of bullish hedge fund bets shrunk by 2 recently. Dorchester Minerals LP (NASDAQ:DMLP) was in 3 hedge funds’ portfolios at the end of March. The all time high for this statistic is 8. Our calculations also showed that DMLP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Chuck Royce of Royce & Associates

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 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 peek at the fresh hedge fund action regarding Dorchester Minerals LP (NASDAQ:DMLP).

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

At Q1’s end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -40% from the fourth quarter of 2020. On the other hand, there were a total of 6 hedge funds with a bullish position in DMLP a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Horizon Asset Management held the most valuable stake in Dorchester Minerals LP (NASDAQ:DMLP), which was worth $11.8 million at the end of the fourth quarter. On the second spot was Royce & Associates which amassed $8.4 million worth of shares. Arrowstreet Capital was also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Horizon Asset Management allocated the biggest weight to Dorchester Minerals LP (NASDAQ:DMLP), around 0.27% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.06 percent of its 13F equity portfolio to DMLP.

Because Dorchester Minerals LP (NASDAQ:DMLP) has faced bearish sentiment from hedge fund managers, we can see that there exists a select few fund managers who were dropping their entire stakes in the first quarter. It’s worth mentioning that Russell Lucas’s Lucas Capital Management dropped the biggest investment of all the hedgies watched by Insider Monkey, worth close to $0.3 million in stock. Ken Griffin’s fund, Citadel Investment Group, also dumped its stock, about $0.3 million worth. These moves are important to note, as total hedge fund interest fell by 2 funds in the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Dorchester Minerals LP (NASDAQ:DMLP) but similarly valued. We will take a look at Oyster Point Pharma, Inc. (NASDAQ:OYST), Farmers National Banc Corp (NASDAQ:FMNB), Caesarstone Ltd (NASDAQ:CSTE), Quantum Corporation (NASDAQ:QMCO), 89bio, Inc. (NASDAQ:ETNB), Reliant Bancorp, Inc. (NASDAQ:RBNC), and Yiren Digital Ltd. (NYSE:YRD). All of these stocks’ market caps are similar to DMLP’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.1 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $21 million in DMLP’s case. Caesarstone Ltd (NASDAQ:CSTE) is the most popular stock in this table. On the other hand Yiren Digital Ltd. (NYSE:YRD) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Dorchester Minerals LP (NASDAQ:DMLP) is even less popular than YRD. Our overall hedge fund sentiment score for DMLP is 14.3. 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. Hedge funds clearly dropped the ball on DMLP as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 DMLP as the stock returned 18.2% since Q1 (through June 11th) and outperformed the market by an even larger margin.

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