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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Dawson Geophysical Company (NASDAQ:DWSN)? The smart money sentiment can provide an answer to this question.
Is Dawson Geophysical Company (NASDAQ:DWSN) the right pick for your portfolio? Investors who are in the know were in a pessimistic mood. The number of bullish hedge fund bets fell by 1 in recent months. Dawson Geophysical Company (NASDAQ:DWSN) was in 3 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 10. Our calculations also showed that DWSN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 4 hedge funds in our database with DWSN positions at the end of the fourth quarter.
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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Fred DiSanto of Ancora Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let's analyze the fresh hedge fund action surrounding Dawson Geophysical Company (NASDAQ:DWSN).
Do Hedge Funds Think DWSN Is A Good Stock To Buy Now?
At first quarter's end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DWSN over the last 23 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the most valuable position in Dawson Geophysical Company (NASDAQ:DWSN). Renaissance Technologies has a $4.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Minerva Advisors, managed by David P. Cohen, which holds a $0.9 million position; the fund has 0.5% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Minerva Advisors allocated the biggest weight to Dawson Geophysical Company (NASDAQ:DWSN), around 0.48% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to DWSN.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Royce & Associates. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified DWSN as a viable investment and initiated a position in the stock.
Let's now take a look at hedge fund activity in other stocks similar to Dawson Geophysical Company (NASDAQ:DWSN). These stocks are SeaChange International, Inc. (NASDAQ:SEAC), Unique Fabricating Inc (NYSE:UFAB), First US Bancshares, Inc. (NASDAQ:FUSB), Navidea Biopharmaceuticals Inc (NYSE:NAVB), Puhui Wealth Investment Management Co., Ltd. (NASDAQ:PHCF), Motus GI Holdings, Inc. (NASDAQ:MOTS), and Cyclacel Pharmaceuticals Inc (NASDAQ:CYCC). This group of stocks' market values are closest to DWSN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SEAC,3,255,-3 UFAB,3,5446,1 FUSB,2,4095,0 NAVB,3,634,0 PHCF,2,252,2 MOTS,6,3178,0 CYCC,8,16256,4 Average,3.9,4302,0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.9 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $5 million in DWSN's case. Cyclacel Pharmaceuticals Inc (NASDAQ:CYCC) is the most popular stock in this table. On the other hand First US Bancshares, Inc. (NASDAQ:FUSB) is the least popular one with only 2 bullish hedge fund positions. Dawson Geophysical Company (NASDAQ:DWSN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DWSN is 21.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on DWSN as the stock returned 11.4% since the end of the first quarter (through 6/11) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.