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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Digi International Inc. (NASDAQ:DGII) based on that data.
Is DGII a good stock to buy now? Digi International Inc. (NASDAQ:DGII) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 11 hedge funds' portfolios at the end of September. Our calculations also showed that DGII isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare DGII to other stocks including Boston Private Financial Hldg Inc (NASDAQ:BPFH), CrossFirst Bankshares, Inc. (NASDAQ:CFB), and Boingo Wireless Inc (NASDAQ:WIFI) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Mario Gabelli of GAMCO Investors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now let's take a look at the recent hedge fund action encompassing Digi International Inc. (NASDAQ:DGII).
Do Hedge Funds Think DGII Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DGII over the last 21 quarters. With the smart money's capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Chuck Royce's Royce & Associates has the largest position in Digi International Inc. (NASDAQ:DGII), worth close to $21.6 million, corresponding to 0.2% of its total 13F portfolio. Sitting at the No. 2 spot is Thomas Ellis and Todd Hammer of North Run Capital, with a $8.5 million position; the fund has 9.8% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions consist of Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Mario Gabelli's GAMCO Investors. In terms of the portfolio weights assigned to each position North Run Capital allocated the biggest weight to Digi International Inc. (NASDAQ:DGII), around 9.8% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.23 percent of its 13F equity portfolio to DGII.
Seeing as Digi International Inc. (NASDAQ:DGII) has experienced falling interest from the entirety of the hedge funds we track, it's easy to see that there lies a certain "tier" of fund managers that elected to cut their entire stakes heading into Q4. Interestingly, Israel Englander's Millennium Management cut the largest investment of the 750 funds tracked by Insider Monkey, totaling an estimated $2 million in stock, and Bruce Kovner's Caxton Associates LP was right behind this move, as the fund dumped about $0.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks similar to Digi International Inc. (NASDAQ:DGII). These stocks are Boston Private Financial Hldg Inc (NASDAQ:BPFH), CrossFirst Bankshares, Inc. (NASDAQ:CFB), Boingo Wireless Inc (NASDAQ:WIFI), Tricida, Inc. (NASDAQ:TCDA), Blucora Inc (NASDAQ:BCOR), Camden National Corporation (NASDAQ:CAC), and Donnelley Financial Solutions, Inc. (NYSE:DFIN). All of these stocks' market caps are closest to DGII's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BPFH,22,29544,2 CFB,3,8221,-1 WIFI,15,190271,0 TCDA,18,143868,-6 BCOR,18,74419,-2 CAC,14,35988,2 DFIN,18,68656,-5 Average,15.4,78710,-1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.4 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $41 million in DGII's case. Boston Private Financial Hldg Inc (NASDAQ:BPFH) is the most popular stock in this table. On the other hand CrossFirst Bankshares, Inc. (NASDAQ:CFB) is the least popular one with only 3 bullish hedge fund positions. Digi International Inc. (NASDAQ:DGII) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DGII is 46.7. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on DGII as the stock returned 11.6% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.