Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors' favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the third quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds' top consensus picks. This year hedge funds' top 20 stock picks outperformed the S&P 500 Index by 9.9 percentage points through the end of November. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Dawson Geophysical Company (NASDAQ:DWSN) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 8 hedge funds' portfolios at the end of the third quarter of 2019. 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 Elmira Savings Bank (NASDAQ:ESBK), Ever-Glory International Group, Inc. (NASDAQ:EVK), and Kingsway Financial Services Inc. (NYSE:KFS) to gather more data points. Our calculations also showed that DWSN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are numerous methods investors can use to analyze stocks. Two of the most underrated methods are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can outperform their index-focused peers by a significant amount (see the details here).
[caption id="attachment_193003" align="aligncenter" width="450"] Chuck Royce of Royce & Associates[/caption]
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. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's go over the new hedge fund action regarding Dawson Geophysical Company (NASDAQ:DWSN).
What have hedge funds been doing with Dawson Geophysical Company (NASDAQ:DWSN)?
At Q3's end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in DWSN a year ago. With hedge funds' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in Dawson Geophysical Company (NASDAQ:DWSN) was held by Renaissance Technologies, which reported holding $3.7 million worth of stock at the end of September. It was followed by Minerva Advisors with a $0.8 million position. Other investors bullish on the company included Ancora Advisors, GRT Capital Partners, and Royce & Associates. In terms of the portfolio weights assigned to each position Minerva Advisors allocated the biggest weight to Dawson Geophysical Company (NASDAQ:DWSN), around 0.47% of its 13F portfolio. GRT Capital Partners is also relatively very bullish on the stock, setting aside 0.12 percent of its 13F equity portfolio to DWSN.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Dawson Geophysical Company (NASDAQ:DWSN) but similarly valued. We will take a look at Elmira Savings Bank (NASDAQ:ESBK), Ever-Glory International Group, Inc. (NASDAQ:EVK), Kingsway Financial Services Inc. (NYSE:KFS), and Bancorp 34, Inc. (NASDAQ:BCTF). All of these stocks' market caps resemble DWSN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ESBK,1,367,0 EVK,1,52,0 KFS,2,837,0 BCTF,2,2538,0 Average,1.5,949,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.5 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $6 million in DWSN's case. Kingsway Financial Services Inc. (NYSE:KFS) is the most popular stock in this table. On the other hand Elmira Savings Bank (NASDAQ:ESBK) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Dawson Geophysical Company (NASDAQ:DWSN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately DWSN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on DWSN were disappointed as the stock returned 5.6% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.