Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Dolby Laboratories, Inc. (NYSE:DLB).
Dolby Laboratories, Inc. (NYSE:DLB) has experienced an increase in support from the world’s most elite money managers in recent months. Dolby Laboratories, Inc. (NYSE:DLB) was in 34 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 35. There were 31 hedge funds in our database with DLB holdings at the end of December. Our calculations also showed that DLB isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Gil Simon of SoMa Equity Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. Now let’s analyze the recent hedge fund action regarding Dolby Laboratories, Inc. (NYSE:DLB).
Do Hedge Funds Think DLB Is A Good Stock To Buy Now?
At first quarter’s end, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards DLB over the last 23 quarters. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, SoMa Equity Partners was the largest shareholder of Dolby Laboratories, Inc. (NYSE:DLB), with a stake worth $227.1 million reported as of the end of March. Trailing SoMa Equity Partners was Polar Capital, which amassed a stake valued at $163.3 million. Southpoint Capital Advisors, Renaissance Technologies, and Two Sigma Advisors were 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 Ararat Capital allocated the biggest weight to Dolby Laboratories, Inc. (NYSE:DLB), around 5.64% of its 13F portfolio. SoMa Equity Partners is also relatively very bullish on the stock, dishing out 4.99 percent of its 13F equity portfolio to DLB.
As industrywide interest jumped, some big names were leading the bulls’ herd. Sunriver Management, managed by Will Cook, assembled the most valuable position in Dolby Laboratories, Inc. (NYSE:DLB). Sunriver Management had $18.2 million invested in the company at the end of the quarter. Alex Sacerdote’s Whale Rock Capital Management also initiated a $6.8 million position during the quarter. The other funds with brand new DLB positions are Jordan Moelis and Jeff Farroni’s Deep Field Asset Management, Qing Li’s Sciencast Management, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Dolby Laboratories, Inc. (NYSE:DLB) but similarly valued. We will take a look at Aegon N.V. (NYSE:AEG), Comerica Incorporated (NYSE:CMA), Floor & Decor Holdings, Inc. (NYSE:FND), Elastic N.V. (NYSE:ESTC), Everest Re Group Ltd (NYSE:RE), Formula One Group (NASDAQ:FWONK), and PRA Health Sciences Inc (NASDAQ:PRAH). This group of stocks’ market values resemble DLB’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AEG | 6 | 26294 | 2 |
| CMA | 32 | 704137 | -6 |
| FND | 38 | 1100201 | 7 |
| ESTC | 52 | 1884446 | 3 |
| RE | 32 | 520803 | 3 |
| FWONK | 37 | 1672098 | -5 |
| PRAH | 35 | 1066188 | 12 |
| Average | 33.1 | 996310 | 2.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.1 hedge funds with bullish positions and the average amount invested in these stocks was $996 million. That figure was $783 million in DLB’s case. Elastic N.V. (NYSE:ESTC) is the most popular stock in this table. On the other hand Aegon N.V. (NYSE:AEG) is the least popular one with only 6 bullish hedge fund positions. Dolby Laboratories, Inc. (NYSE:DLB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DLB is 67.6. 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 19.3% in 2021 through June 25th and beat the market again by 4.8 percentage points. Unfortunately DLB wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on DLB were disappointed as the stock returned 1.6% since the end of March (through 6/25) 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.
Follow Dolby Laboratories Inc. (NYSE:DLB)
Follow Dolby Laboratories Inc. (NYSE:DLB)
Suggested Articles:
- How to Best Use Insider Monkey To Increase Your Returns
- 10 Best Education Stocks To Buy Now
- 10 Easiest Occupational Therapy Schools To Get Into
Disclosure: None. This article was originally published at Insider Monkey.
