Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 8 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 9 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Dunkin Brands Group Inc (NASDAQ:DNKN).
In the 21st century investor’s toolkit there are a multitude of gauges market participants use to appraise stocks. A duo of the less known gauges are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can outclass the market by a solid amount (see the details here).
We're going to take a glance at the fresh hedge fund action encompassing Dunkin Brands Group Inc (NASDAQ:DNKN).
Hedge fund activity in Dunkin Brands Group Inc (NASDAQ:DNKN)
At Q1's end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DNKN over the last 15 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Dunkin Brands Group Inc (NASDAQ:DNKN) was held by Marshall Wace LLP, which reported holding $49.1 million worth of stock at the end of March. It was followed by Millennium Management with a $34.9 million position. Other investors bullish on the company included Citadel Investment Group, Maverick Capital, and Two Sigma Advisors.
As industrywide interest jumped, specific money managers were breaking ground themselves. Maverick Capital, managed by Lee Ainslie, established the largest position in Dunkin Brands Group Inc (NASDAQ:DNKN). Maverick Capital had $19.4 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also initiated a $12.5 million position during the quarter. The following funds were also among the new DNKN investors: Dmitry Balyasny's Balyasny Asset Management, Doug Gordon, Jon Hilsabeck and Don Jabro's Shellback Capital, and Ian Simm's Impax Asset Management.
Let's check out hedge fund activity in other stocks similar to Dunkin Brands Group Inc (NASDAQ:DNKN). We will take a look at Enable Midstream Partners LP (NYSE:ENBL), LG Display Co Ltd. (NYSE:LPL), Millicom International Cellular S.A. (NASDAQ:TIGO), and The Chemours Company (NYSE:CC). All of these stocks' market caps are closest to DNKN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ENBL,5,32143,1 LPL,6,16279,1 TIGO,5,125387,5 CC,30,296681,2 Average,11.5,117623,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $118 million. That figure was $186 million in DNKN's case. The Chemours Company (NYSE:CC) is the most popular stock in this table. On the other hand Enable Midstream Partners LP (NYSE:ENBL) is the least popular one with only 5 bullish hedge fund positions. Dunkin Brands Group Inc (NASDAQ:DNKN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on DNKN as the stock returned 6.9% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.