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Dorian LPG Ltd (LPG): Hedge Funds Cashing Out

Asma UL Husna

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Dorian LPG Ltd (NYSE:LPG) based on those filings.

Dorian LPG Ltd (NYSE:LPG) investors should be aware of a decrease in support from the world's most elite money managers of late. Our calculations also showed that LPG 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.

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 58 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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

[caption id="attachment_735641" align="aligncenter" width="392"] Michael Lowenstein of Kensico Capital[/caption]

Michael Lowenstein Kensico Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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. Now let's review the latest hedge fund action surrounding Dorian LPG Ltd (NYSE:LPG).

How are hedge funds trading Dorian LPG Ltd (NYSE:LPG)?

Heading into the second quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in LPG a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Kensico Capital held the most valuable stake in Dorian LPG Ltd (NYSE:LPG), which was worth $69.8 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $14.6 million worth of shares. GLG Partners, Renaissance Technologies, and Arrowstreet 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 Kensico Capital allocated the biggest weight to Dorian LPG Ltd (NYSE:LPG), around 1.91% of its 13F portfolio. Dalton Investments is also relatively very bullish on the stock, earmarking 0.77 percent of its 13F equity portfolio to LPG.

Seeing as Dorian LPG Ltd (NYSE:LPG) has witnessed bearish sentiment from hedge fund managers, it's easy to see that there lies a certain "tier" of funds who sold off their positions entirely in the first quarter. At the top of the heap, Bruce Kovner's Caxton Associates LP said goodbye to the largest stake of all the hedgies monitored by Insider Monkey, worth about $1 million in stock. Paul Tudor Jones's fund, Tudor Investment Corp, also sold off its stock, about $1 million worth. These moves are important to note, as total hedge fund interest fell by 5 funds in the first quarter.

Let's go over hedge fund activity in other stocks similar to Dorian LPG Ltd (NYSE:LPG). We will take a look at Winmark Corporation (NASDAQ:WINA), Veeco Instruments Inc. (NASDAQ:VECO), Textainer Group Holdings Limited (NYSE:TGH), and DRDGOLD Ltd. (NYSE:DRD). This group of stocks' market valuations are similar to LPG's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WINA,11,76758,-1 VECO,14,238257,-1 TGH,11,14043,-2 DRD,2,7055,-1 Average,9.5,84028,-1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $107 million in LPG's case. Veeco Instruments Inc. (NASDAQ:VECO) is the most popular stock in this table. On the other hand DRDGOLD Ltd. (NYSE:DRD) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Dorian LPG Ltd (NYSE:LPG) is more popular among hedge funds. 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 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. Unfortunately LPG wasn't nearly as popular as these 10 stocks and hedge funds that were betting on LPG were disappointed as the stock returned -9.8% during the second quarter (through June 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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

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