The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors endured a torrid quarter, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Diplomat Pharmacy Inc (NYSE:DPLO).
Diplomat Pharmacy Inc (NYSE:DPLO) shareholders have witnessed a decrease in activity from the world's largest hedge funds of late. Our calculations also showed that DPLO isn't among the 30 most popular stocks among hedge funds.
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' 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 market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let's take a peek at the latest hedge fund action surrounding Diplomat Pharmacy Inc (NYSE:DPLO).
What does the smart money think about Diplomat Pharmacy Inc (NYSE:DPLO)?
Heading into the first quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DPLO over the last 14 quarters. With hedgies' capital changing hands, there exists an "upper tier" of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Deerfield Management, managed by James E. Flynn, holds the most valuable position in Diplomat Pharmacy Inc (NYSE:DPLO). Deerfield Management has a $31.6 million position in the stock, comprising 1.3% of its 13F portfolio. On Deerfield Management's heels is Israel Englander of Millennium Management, with a $9.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other members of the smart money that hold long positions contain Dmitry Balyasny's Balyasny Asset Management, Chuck Royce's Royce & Associates and Cristan Blackman's Empirical Capital Partners.
Due to the fact that Diplomat Pharmacy Inc (NYSE:DPLO) has witnessed bearish sentiment from the smart money, we can see that there were a few hedgies that decided to sell off their full holdings in the third quarter. Interestingly, Noam Gottesman's GLG Partners sold off the biggest stake of the 700 funds monitored by Insider Monkey, valued at close to $9.4 million in stock, and David Harding's Winton Capital Management was right behind this move, as the fund dropped about $7.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 3 funds in the third quarter.
Let's check out hedge fund activity in other stocks similar to Diplomat Pharmacy Inc (NYSE:DPLO). We will take a look at Investment Technology Group (NYSE:ITG), Organogenesis Holdings Inc. (NASDAQ:ORGO), K12 Inc. (NYSE:LRN), and Neenah, Inc. (NYSE:NP). This group of stocks' market values are closest to DPLO's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ITG,14,85669,4 ORGO,8,27212,-5 LRN,21,152616,2 NP,4,6594,-3 Average,11.75,68023,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $62 million in DPLO's case. K12 Inc. (NYSE:LRN) is the most popular stock in this table. On the other hand Neenah, Inc. (NYSE:NP) is the least popular one with only 4 bullish hedge fund positions. Diplomat Pharmacy Inc (NYSE:DPLO) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately DPLO wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); DPLO investors were disappointed as the stock returned -59.6% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.