Is The Descartes Systems Group Inc (NASDAQ:DSGX) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
The Descartes Systems Group Inc (NASDAQ:DSGX) has seen an increase in hedge fund interest in recent months. DSGX was in 14 hedge funds' portfolios at the end of September. There were 11 hedge funds in our database with DSGX holdings at the end of the previous quarter. Our calculations also showed that DSGX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to 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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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_673876" align="aligncenter" width="473"] John Overdeck of Two Sigma Advisors[/caption]
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. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to take a look at the recent hedge fund action regarding The Descartes Systems Group Inc (NASDAQ:DSGX).
What does smart money think about The Descartes Systems Group Inc (NASDAQ:DSGX)?
Heading into the fourth quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in DSGX a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Echo Street Capital Management was the largest shareholder of The Descartes Systems Group Inc (NASDAQ:DSGX), with a stake worth $69.8 million reported as of the end of September. Trailing Echo Street Capital Management was Renaissance Technologies, which amassed a stake valued at $23.4 million. Royce & Associates, Millennium Management, and Two Sigma Advisors 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 Echo Street Capital Management allocated the biggest weight to The Descartes Systems Group Inc (NASDAQ:DSGX), around 1.18% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.15 percent of its 13F equity portfolio to DSGX.
As aggregate interest increased, some big names were breaking ground themselves. Akre Capital Management, managed by Charles Akre, established the biggest position in The Descartes Systems Group Inc (NASDAQ:DSGX). Akre Capital Management had $2 million invested in the company at the end of the quarter. David E. Shaw's D E Shaw also initiated a $1.4 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace's Marshall Wace, Minhua Zhang's Weld Capital Management, and Donald Sussman's Paloma Partners.
Let's now take a look at hedge fund activity in other stocks similar to The Descartes Systems Group Inc (NASDAQ:DSGX). These stocks are Axon Enterprise, Inc. (NASDAQ:AAXN), Tegna Inc (NYSE:TGNA), Terreno Realty Corporation (NYSE:TRNO), and Globant SA (NYSE:GLOB). This group of stocks' market caps resemble DSGX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AAXN,14,209400,-2 TGNA,18,359437,3 TRNO,10,51158,1 GLOB,16,70256,2 Average,14.5,172563,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $173 million. That figure was $126 million in DSGX's case. Tegna Inc (NYSE:TGNA) is the most popular stock in this table. On the other hand Terreno Realty Corporation (NYSE:TRNO) is the least popular one with only 10 bullish hedge fund positions. The Descartes Systems Group Inc (NASDAQ:DSGX) 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 DSGX, though not to the same extent, as the stock returned 6.3% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.