In this article we will take a look at whether hedge funds think Dorchester Minerals LP (NASDAQ:DMLP) 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.
Is Dorchester Minerals LP (NASDAQ:DMLP) undervalued? The best stock pickers are buying. The number of long hedge fund positions improved by 1 lately. Our calculations also showed that DMLP 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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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_746830" align="aligncenter" width="400"] Matthew Hulsizer of PEAK6 Capital[/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. With all of this in mind we're going to take a look at the key hedge fund action encompassing Dorchester Minerals LP (NASDAQ:DMLP).
How are hedge funds trading Dorchester Minerals LP (NASDAQ:DMLP)?
At the end of the first quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DMLP over the last 18 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in Dorchester Minerals LP (NASDAQ:DMLP), which was worth $7.4 million at the end of the third quarter. On the second spot was Horizon Asset Management which amassed $6.4 million worth of shares. Arrowstreet Capital, Lucas Capital Management, and Citadel Investment Group 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 Lucas Capital Management allocated the biggest weight to Dorchester Minerals LP (NASDAQ:DMLP), around 0.45% of its 13F portfolio. Horizon Asset Management is also relatively very bullish on the stock, dishing out 0.28 percent of its 13F equity portfolio to DMLP.
With a general bullishness amongst the heavyweights, some big names were leading the bulls' herd. Citadel Investment Group, managed by Ken Griffin, assembled the most outsized position in Dorchester Minerals LP (NASDAQ:DMLP). Citadel Investment Group had $0.2 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also initiated a $0.1 million position during the quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Dorchester Minerals LP (NASDAQ:DMLP) but similarly valued. We will take a look at HCI Group Inc (NYSE:HCI), Lizhi Inc. (NASDAQ:LIZI), Computer Programs & Systems, Inc. (NASDAQ:CPSI), and Pzena Investment Management Inc (NYSE:PZN). All of these stocks' market caps are similar to DMLP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HCI,10,21739,0 LIZI,1,355,1 CPSI,12,19417,-1 PZN,7,7192,0 Average,7.5,12176,0 [/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 $12 million. That figure was $15 million in DMLP's case. Computer Programs & Systems, Inc. (NASDAQ:CPSI) is the most popular stock in this table. On the other hand Lizhi Inc. (NASDAQ:LIZI) is the least popular one with only 1 bullish hedge fund positions. Dorchester Minerals LP (NASDAQ:DMLP) is not the least popular stock in this group but hedge fund interest is still below average. 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on DMLP as the stock returned 45.2% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.