Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won't accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Hedge fund interest in Daseke, Inc. (NASDAQ:DSKE) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare DSKE to other stocks including Powell Industries, Inc. (NASDAQ:POWL), Tilly's Inc (NYSE:TLYS), and Citizens, Inc. (NYSE:CIA) to get a better sense of its popularity.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a peek at the fresh hedge fund action regarding Daseke, Inc. (NASDAQ:DSKE).
What have hedge funds been doing with Daseke, Inc. (NASDAQ:DSKE)?
Heading into the second quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in DSKE over the last 15 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
The largest stake in Daseke, Inc. (NASDAQ:DSKE) was held by Coliseum Capital, which reported holding $4.1 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $1.2 million position. Other investors bullish on the company included Prescott Group Capital Management, Arrowstreet Capital, and Millennium Management.
Seeing as Daseke, Inc. (NASDAQ:DSKE) has experienced falling interest from hedge fund managers, it's easy to see that there is a sect of hedgies who were dropping their entire stakes in the third quarter. At the top of the heap, Noam Gottesman's GLG Partners sold off the largest stake of the 700 funds tracked by Insider Monkey, worth about $3.3 million in stock, and John Overdeck and David Siegel's Two Sigma Advisors was right behind this move, as the fund said goodbye to about $0.1 million worth. These bearish behaviors are important to note, 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 Daseke, Inc. (NASDAQ:DSKE). We will take a look at Powell Industries, Inc. (NASDAQ:POWL), Tilly's Inc (NYSE:TLYS), Citizens, Inc. (NYSE:CIA), and Allied Motion Technologies, Inc. (NASDAQ:AMOT). This group of stocks' market valuations are closest to DSKE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position POWL,9,21074,1 TLYS,16,64259,1 CIA,2,1384,0 AMOT,12,32307,0 Average,9.75,29756,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $10 million in DSKE's case. Tilly's Inc (NYSE:TLYS) is the most popular stock in this table. On the other hand Citizens, Inc. (NYSE:CIA) is the least popular one with only 2 bullish hedge fund positions. Daseke, Inc. (NASDAQ:DSKE) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately DSKE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); DSKE investors were disappointed as the stock returned -23.4% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.