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A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended March 31st, so let’s proceed with the discussion of the hedge fund sentiment on Designer Brands Inc. (NYSE:DBI).
Is DBI a good stock to buy? The smart money was in an optimistic mood. The number of bullish hedge fund bets moved up by 1 lately. Designer Brands Inc. (NYSE:DBI) was in 18 hedge funds' portfolios at the end of March. The all time high for this statistic is 29. Our calculations also showed that DBI isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Michael Burry of Scion Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. Keeping this in mind let's review the recent hedge fund action regarding Designer Brands Inc. (NYSE:DBI).
Do Hedge Funds Think DBI Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in DBI a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Among these funds, Masters Capital Management held the most valuable stake in Designer Brands Inc. (NYSE:DBI), which was worth $32.2 million at the end of the fourth quarter. On the second spot was Driehaus Capital which amassed $18.7 million worth of shares. Arrowstreet Capital, Millennium Management, and Skylands Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Roubaix Capital allocated the biggest weight to Designer Brands Inc. (NYSE:DBI), around 1.85% of its 13F portfolio. Pacifica Capital Investments is also relatively very bullish on the stock, setting aside 1.5 percent of its 13F equity portfolio to DBI.
Consequently, key money managers have jumped into Designer Brands Inc. (NYSE:DBI) headfirst. Driehaus Capital, managed by Richard Driehaus, initiated the biggest position in Designer Brands Inc. (NYSE:DBI). Driehaus Capital had $18.7 million invested in the company at the end of the quarter. Frederick DiSanto's Ancora Advisors also initiated a $4.1 million position during the quarter. The other funds with new positions in the stock are Brad Stephens's Six Columns Capital, Christopher Hillary's Roubaix Capital, and Robert Pohly's Samlyn Capital.
Let's also examine hedge fund activity in other stocks similar to Designer Brands Inc. (NYSE:DBI). We will take a look at Safety Insurance Group, Inc. (NASDAQ:SAFT), K12 Inc. (NYSE:LRN), Matthews International Corp (NASDAQ:MATW), Kosmos Energy Ltd (NYSE:KOS), Teekay LNG Partners L.P. (NYSE:TGP), Dime Community Bancshares, Inc. (NASDAQ:DCOM), and Mesa Laboratories, Inc. (NASDAQ:MLAB). This group of stocks' market values match DBI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SAFT,15,43641,3 LRN,14,101456,0 MATW,15,89807,-1 KOS,8,16686,-2 TGP,9,29517,-1 DCOM,11,186535,1 MLAB,11,88345,1 Average,11.9,79427,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.9 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $110 million in DBI's case. Safety Insurance Group, Inc. (NASDAQ:SAFT) is the most popular stock in this table. On the other hand Kosmos Energy Ltd (NYSE:KOS) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Designer Brands Inc. (NYSE:DBI) is more popular among hedge funds. Our overall hedge fund sentiment score for DBI is 74.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Unfortunately DBI wasn't nearly as popular as these 5 stocks and hedge funds that were betting on DBI were disappointed as the stock returned -17.3% since the end of the first quarter (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.