Should You Buy Dreamworks Animation Skg Inc (DWA)?

Before we spend days researching a stock idea, we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index returned about 5.2% during the last 12 months ending October 30, 2015. Less than 49% of the stocks in the index outperformed the index. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 30 S&P 500 stocks among hedge funds at the end of September 2014 had an average return of 9.5% during the same period. Sixty three percent of these 30 stocks outperformed the market. Hedge funds had bad stock picks like everyone else. Micron, which lost 50% over this period, was one of hedge funds’ 30 favorite S&P 500 stocks. Anadarko Petroleum was another failed stock pick which lost more than 26%. So, taking cues from hedge funds isn’t a foolproof strategy, but it seems to work on average. In this article, we will take a look at what hedge funds think about Dreamworks Animation Skg Inc (NASDAQ:DWA).

Dreamworks Animation Skg Inc (NASDAQ:DWA) has experienced an increase in hedge fund sentiment in recent months. It could be really surprising, considering that the shares of the company declined 33.85% during the third quarter. In order to find out more about the hedge fund sentiment, we will cover hedgies that held positions in Dreamworks Animation Skg Inc (NASDAQ:DWA), at the end of the last quarter.

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 Penn National Gaming, Inc (NASDAQ:PENN), Hawaiian Holdings, Inc. (NASDAQ:HA), and DigitalGlobe Inc (NYSE:DGI) to gather more data points.

In the eyes of most traders, hedge funds are seen as slow, outdated investment tools of the past. While there are over an 8000 funds trading at the moment, we look at the crème de la crème of this club, approximately 700 funds. Most estimates calculate that this group of people administers bulk of all hedge funds’ total asset base, and by watching their finest picks, Insider Monkey has figured out numerous investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Now, we’re going to review the latest action regarding Dreamworks Animation Skg Inc (NASDAQ:DWA).

How have hedgies been trading Dreamworks Animation Skg Inc (NASDAQ:DWA)?

Heading into Q4, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 13% from the second quarter. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Mason Hawkins’ Southeastern Asset Management has the most valuable position in Dreamworks Animation Skg Inc (NASDAQ:DWA), worth close to $287.7 million, comprising 2.4% of its total 13F portfolio. Sitting at the No. 2 spot is Horizon Asset Management, managed by Murray Stahl, which holds a $160.4 million position; the fund has 2.9% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism contain Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group, and Jeffrey Bronchick’s Cove Street Capital.

Now, key hedge funds have jumped into Dreamworks Animation Skg Inc (NASDAQ:DWA) headfirst. AlphaOne Capital Partners, managed by Paul Hondros, created the biggest position in Dreamworks Animation Skg Inc (NASDAQ:DWA). AlphaOne Capital Partners had $2.5 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $0.2 million position during the quarter. The other funds with new positions in the stock are Jacob Gottlieb’s Visium Asset Management, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Dreamworks Animation Skg Inc (NASDAQ:DWA) but similarly valued. We will take a look at Penn National Gaming, Inc (NASDAQ:PENN), Hawaiian Holdings, Inc. (NASDAQ:HA), DigitalGlobe Inc (NYSE:DGI), and IPC The Hospitalist Company Inc (NASDAQ:IPCM). This group of stocks’ market values resemble Dreamworks Animation Skg Inc (NASDAQ:DWA)’s market value.

As you can see, these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $261 million. That figure was $494 million in Dreamworks Animation Skg Inc (NASDAQ:DWA)’s case. Penn National Gaming, Inc (NASDAQ:PENN) is the most popular stock in this table. On the other hand, IPC The Hospitalist Company Inc (NASDAQ:IPCM) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks, Dreamworks Animation Skg Inc (NASDAQ:DWA) is even less popular than IPC The Hospitalist Company Inc (NASDAQ:IPCM). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.