The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don't follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That's why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Diamond S Shipping Inc. (NYSE:DSSI) from the perspective of those elite funds.
Diamond S Shipping Inc. (NYSE:DSSI) investors should pay attention to an increase in activity from the world's largest hedge funds in recent months. Our calculations also showed that DSSI isn't among the 30 most popular stocks among hedge funds (see the video below). 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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to check out the fresh hedge fund action regarding Diamond S Shipping Inc. (NYSE:DSSI).
What does smart money think about Diamond S Shipping Inc. (NYSE:DSSI)?
Heading into the third quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 57% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in DSSI a year ago. 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, Wilbur Ross's Invesco Private Capital (WL Ross) has the most valuable position in Diamond S Shipping Inc. (NYSE:DSSI), worth close to $123.9 million, accounting for 34.7% of its total 13F portfolio. On Invesco Private Capital (WL Ross)'s heels is Fairfax Financial Holdings, managed by Prem Watsa, which holds a $13.2 million position; 0.6% of its 13F portfolio is allocated to the company. Some other professional money managers that are bullish contain Ari Zweiman's 683 Capital Partners, Clint Carlson's Carlson Capital and Steve Cohen's Point72 Asset Management.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls' herd. Fairfax Financial Holdings, managed by Prem Watsa, established the most outsized position in Diamond S Shipping Inc. (NYSE:DSSI). Fairfax Financial Holdings had $13.2 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also initiated a $2.5 million position during the quarter. The other funds with new positions in the stock are George McCabe's Portolan Capital Management, Zachary Miller's Parian Global Management, and Ken Griffin's Citadel Investment Group.
Let's go over hedge fund activity in other stocks similar to Diamond S Shipping Inc. (NYSE:DSSI). We will take a look at Revance Therapeutics Inc (NASDAQ:RVNC), Ellington Financial Inc. (NYSE:EFC), Casa Systems, Inc. (NASDAQ:CASA), and National CineMedia, Inc. (NASDAQ:NCMI). This group of stocks' market valuations resemble DSSI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RVNC,10,27622,-2 EFC,9,47666,-1 CASA,13,20586,-6 NCMI,16,39601,-2 Average,12,33869,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $150 million in DSSI's case. National CineMedia, Inc. (NASDAQ:NCMI) is the most popular stock in this table. On the other hand Ellington Financial Inc. (NYSE:EFC) is the least popular one with only 9 bullish hedge fund positions. Diamond S Shipping Inc. (NYSE:DSSI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately DSSI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); DSSI investors were disappointed as the stock returned -13.7% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.