In this article we will take a look at whether hedge funds think Delta Apparel, Inc. (NYSE:DLA) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Delta Apparel, Inc. (NYSE:DLA) investors should pay attention to a decrease in hedge fund sentiment of late. DLA was in 4 hedge funds' portfolios at the end of March. There were 5 hedge funds in our database with DLA positions at the end of the previous quarter. Our calculations also showed that DLA isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 87% since March 2017 and outperformed the S&P 500 ETFs by more than 51 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_140292" align="aligncenter" width="400"] Israel Englander of Millennium Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to go over the fresh hedge fund action regarding Delta Apparel, Inc. (NYSE:DLA).
Hedge fund activity in Delta Apparel, Inc. (NYSE:DLA)
Heading into the second quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the previous quarter. By comparison, 5 hedge funds held shares or bullish call options in DLA 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.
When looking at the institutional investors followed by Insider Monkey, Deep Field Asset Management, managed by Jordan Moelis and Jeff Farroni, holds the number one position in Delta Apparel, Inc. (NYSE:DLA). Deep Field Asset Management has a $3.4 million position in the stock, comprising 2.1% of its 13F portfolio. The second largest stake is held by Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $0.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish include Frederick DiSanto's Ancora Advisors, Renaissance Technologies and . In terms of the portfolio weights assigned to each position Deep Field Asset Management allocated the biggest weight to Delta Apparel, Inc. (NYSE:DLA), around 2.06% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to DLA.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified DLA as a viable investment and initiated a position in the stock.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Delta Apparel, Inc. (NYSE:DLA) but similarly valued. We will take a look at Eton Pharmaceutcials, Inc. (NASDAQ:ETON), Galmed Pharmaceuticals Ltd (NASDAQ:GLMD), Xeris Pharmaceuticals, Inc. (NASDAQ:XERS), and Inspired Entertainment, Inc. (NASDAQ:INSE). This group of stocks' market values resemble DLA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ETON,4,18066,2 GLMD,10,18167,0 XERS,10,21986,4 INSE,6,16663,0 Average,7.5,18721,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $4 million in DLA's case. Galmed Pharmaceuticals Ltd (NASDAQ:GLMD) is the most popular stock in this table. On the other hand Eton Pharmaceutcials, Inc. (NASDAQ:ETON) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Delta Apparel, Inc. (NYSE:DLA) is even less popular than ETON. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on DLA, though not to the same extent, as the stock returned 18.3% during the second quarter (through the end of May) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.