Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Dine Brands Global, Inc. (NYSE:DIN) changed recently.
Is Dine Brands Global, Inc. (NYSE:DIN) an excellent investment today? Money managers are becoming less hopeful. The number of bullish hedge fund bets dropped by 5 recently. Our calculations also showed that DIN isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most stock holders, hedge funds are assumed to be underperforming, outdated financial vehicles of the past. While there are greater than 8000 funds with their doors open at present, We choose to focus on the elite of this group, around 750 funds. It is estimated that this group of investors administer most of the smart money's total capital, and by keeping an eye on their matchless stock picks, Insider Monkey has discovered a few investment strategies that have historically surpassed Mr. Market. Insider Monkey's flagship hedge fund strategy outstripped the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a peek at the new hedge fund action encompassing Dine Brands Global, Inc. (NYSE:DIN).
Hedge fund activity in Dine Brands Global, Inc. (NYSE:DIN)
Heading into the third quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DIN over the last 16 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, MSD Capital was the largest shareholder of Dine Brands Global, Inc. (NYSE:DIN), with a stake worth $70.7 million reported as of the end of March. Trailing MSD Capital was Renaissance Technologies, which amassed a stake valued at $66.7 million. Ancora Advisors, PDT Partners, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Dine Brands Global, Inc. (NYSE:DIN) has witnessed a decline in interest from the entirety of the hedge funds we track, it's safe to say that there exists a select few hedge funds that decided to sell off their positions entirely heading into Q3. Interestingly, Gregg Moskowitz's Interval Partners cut the biggest investment of the "upper crust" of funds tracked by Insider Monkey, valued at close to $10.7 million in stock. Israel Englander's fund, Millennium Management, also said goodbye to its stock, about $9.1 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 5 funds heading into Q3.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Dine Brands Global, Inc. (NYSE:DIN) but similarly valued. These stocks are Crescent Point Energy Corp (NYSE:CPG), Valaris plc (NYSE:ESV), Global Net Lease, Inc. (NYSE:GNL), and LGI Homes Inc (NASDAQ:LGIH). All of these stocks' market caps are similar to DIN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CPG,12,65098,-5 ESV,28,433554,7 GNL,8,46148,-3 LGIH,12,127230,-2 Average,15,168008,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $168 million. That figure was $160 million in DIN's case. Valaris plc (NYSE:ESV) is the most popular stock in this table. On the other hand Global Net Lease, Inc. (NYSE:GNL) is the least popular one with only 8 bullish hedge fund positions. Dine Brands Global, Inc. (NYSE:DIN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately DIN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); DIN investors were disappointed as the stock returned -19.8% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.