Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Douglas Dynamics Inc (NYSE:PLOW), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is PLOW a good stock to buy now? Hedge fund interest in Douglas Dynamics Inc (NYSE:PLOW) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that PLOW isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). 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 Trean Insurance Group, Inc. (NASDAQ:TIG), Keros Therapeutics, Inc. (NASDAQ:KROS), and i3 Verticals, Inc. (NASDAQ:IIIV) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Overdeck of Two Sigma
John Overdeck of Two Sigma Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 website. Keeping this in mind we're going to take a look at the new hedge fund action encompassing Douglas Dynamics Inc (NYSE:PLOW).
What have hedge funds been doing with Douglas Dynamics Inc (NYSE:PLOW)?
At third quarter's end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in PLOW a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Douglas Dynamics Inc (NYSE:PLOW) was held by Citadel Investment Group, which reported holding $2 million worth of stock at the end of September. It was followed by Millennium Management with a $1 million position. Other investors bullish on the company included Two Sigma Advisors, ExodusPoint Capital, and Winton Capital Management. In terms of the portfolio weights assigned to each position Navellier & Associates allocated the biggest weight to Douglas Dynamics Inc (NYSE:PLOW), around 0.06% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to PLOW.
Seeing as Douglas Dynamics Inc (NYSE:PLOW) has witnessed bearish sentiment from the smart money, it's easy to see that there was a specific group of hedge funds who sold off their entire stakes in the third quarter. It's worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dumped the largest investment of all the hedgies monitored by Insider Monkey, comprising close to $0.3 million in stock. Cliff Asness's fund, AQR Capital Management, also sold off its stock, about $0.2 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to Douglas Dynamics Inc (NYSE:PLOW). These stocks are Trean Insurance Group, Inc. (NASDAQ:TIG), Keros Therapeutics, Inc. (NASDAQ:KROS), i3 Verticals, Inc. (NASDAQ:IIIV), Newmark Group, Inc. (NASDAQ:NMRK), Triumph Bancorp Inc (NASDAQ:TBK), Puxin Limited (NYSE:NEW), and Forterra, Inc. (NASDAQ:FRTA). This group of stocks' market values match PLOW's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TIG,14,49185,14 KROS,8,214776,-3 IIIV,18,68722,6 NMRK,19,88996,-5 TBK,5,33554,-2 NEW,7,10525,-1 FRTA,27,128985,14 Average,14,84963,3.3 [/table]
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $5 million in PLOW's case. Forterra, Inc. (NASDAQ:FRTA) is the most popular stock in this table. On the other hand Triumph Bancorp Inc (NASDAQ:TBK) is the least popular one with only 5 bullish hedge fund positions. Douglas Dynamics Inc (NYSE:PLOW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PLOW is 22.7. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on PLOW as the stock returned 14.4% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
