Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Donnelley Financial Solutions, Inc. (NYSE:DFIN) based on that data.
Donnelley Financial Solutions, Inc. (NYSE:DFIN) was in 18 hedge funds’ portfolios at the end of March. DFIN investors should be aware of a decrease in hedge fund interest lately. There were 22 hedge funds in our database with DFIN positions at the end of the previous quarter. Our calculations also showed that DFIN 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Paul Marshall of Marshall Wace
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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. Now let’s take a look at the recent hedge fund action surrounding Donnelley Financial Solutions, Inc. (NYSE:DFIN).
How are hedge funds trading Donnelley Financial Solutions, Inc. (NYSE:DFIN)?
Heading into the second quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DFIN over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Simcoe Capital Management held the most valuable stake in Donnelley Financial Solutions, Inc. (NYSE:DFIN), which was worth $17.4 million at the end of the third quarter. On the second spot was D E Shaw which amassed $3.4 million worth of shares. Marshall Wace LLP, Invenomic Capital Management, 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 Simcoe Capital Management allocated the biggest weight to Donnelley Financial Solutions, Inc. (NYSE:DFIN), around 5.33% of its 13F portfolio. AlphaOne Capital Partners is also relatively very bullish on the stock, designating 0.87 percent of its 13F equity portfolio to DFIN.
Because Donnelley Financial Solutions, Inc. (NYSE:DFIN) has experienced falling interest from the smart money, we can see that there were a few fund managers who sold off their entire stakes heading into Q4. Intriguingly, Touk Sinantha’s AltraVue Capital dropped the biggest stake of the “upper crust” of funds followed by Insider Monkey, valued at close to $2.1 million in stock, and Harry Gail’s Harspring Capital Management was right behind this move, as the fund said goodbye to about $0.4 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to Donnelley Financial Solutions, Inc. (NYSE:DFIN). We will take a look at CapStar Financial Holdings, Inc. (NASDAQ:CSTR), Cabaletta Bio, Inc. (NASDAQ:CABA), Tecnoglass Inc. (NASDAQ:TGLS), and Viemed Healthcare, Inc. (NASDAQ:VMD). This group of stocks’ market caps are similar to DFIN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CSTR | 10 | 7454 | 5 |
| CABA | 9 | 69313 | 2 |
| TGLS | 5 | 6805 | 0 |
| VMD | 7 | 8912 | -1 |
| Average | 7.75 | 23121 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $28 million in DFIN’s case. CapStar Financial Holdings, Inc. (NASDAQ:CSTR) is the most popular stock in this table. On the other hand Tecnoglass Inc. (NASDAQ:TGLS) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Donnelley Financial Solutions, Inc. (NYSE:DFIN) is more popular among hedge funds. 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 returned 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on DFIN as the stock returned 58.3% so far in Q2 (through June 22nd) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
