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Dolby Laboratories, Inc. (DLB): Hedge Funds In Wait-and-See Mode

Reymerlyn Martin

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 September 30, so let’s proceed with the discussion of the hedge fund sentiment on Dolby Laboratories, Inc. (NYSE:DLB).

Dolby Laboratories, Inc. (NYSE:DLB) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 27 hedge funds' portfolios at the end of September. At the end of this article we will also compare DLB to other stocks including HD Supply Holdings Inc (NASDAQ:HDS), Charles River Laboratories International Inc. (NYSE:CRL), and East West Bancorp, Inc. (NASDAQ:EWBC) to get a better sense of its popularity. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_758440" align="aligncenter" width="600"] Michael Price of MFP Investors[/caption]

Michael Price MFP Investors

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a peek at the recent hedge fund action regarding Dolby Laboratories, Inc. (NYSE:DLB).

Hedge fund activity in Dolby Laboratories, Inc. (NYSE:DLB)

At Q3's end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DLB over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

DLB_dec2019

More specifically, Renaissance Technologies was the largest shareholder of Dolby Laboratories, Inc. (NYSE:DLB), with a stake worth $156 million reported as of the end of September. Trailing Renaissance Technologies was Polar Capital, which amassed a stake valued at $115.2 million. MFP Investors, Nantahala Capital Management, and Woodson Capital Management 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 BeaconLight Capital allocated the biggest weight to Dolby Laboratories, Inc. (NYSE:DLB), around 7.46% of its portfolio. Alta Park Capital is also relatively very bullish on the stock, dishing out 7.29 percent of its 13F equity portfolio to DLB.

Because Dolby Laboratories, Inc. (NYSE:DLB) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there lies a certain "tier" of money managers that elected to cut their positions entirely heading into Q4. Interestingly, Dmitry Balyasny's Balyasny Asset Management cut the biggest stake of all the hedgies followed by Insider Monkey, totaling an estimated $1 million in stock. Minhua Zhang's fund, Weld Capital Management, also cut its stock, about $0.9 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 now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Dolby Laboratories, Inc. (NYSE:DLB) but similarly valued. These stocks are HD Supply Holdings Inc (NASDAQ:HDS), Charles River Laboratories International Inc. (NYSE:CRL), East West Bancorp, Inc. (NASDAQ:EWBC), and Watsco Inc (NYSE:WSO). This group of stocks' market values resemble DLB's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HDS,33,965472,3 CRL,32,875494,3 EWBC,27,426545,-1 WSO,18,138904,-4 Average,27.5,601604,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $602 million. That figure was $539 million in DLB's case. HD Supply Holdings Inc (NASDAQ:HDS) is the most popular stock in this table. On the other hand Watsco Inc (NYSE:WSO) is the least popular one with only 18 bullish hedge fund positions. Dolby Laboratories, Inc. (NYSE:DLB) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on DLB, though not to the same extent, as the stock returned 6.9% during the first two months of the fourth quarter and outperformed the market.

Disclosure: None. This article was originally published at Insider Monkey.

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