We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Dine Brands Global, Inc. (NYSE:DIN) and determine whether hedge funds skillfully traded this stock.
Dine Brands Global, Inc. (NYSE:DIN) investors should be aware of an increase in support from the world's most elite money managers recently. Dine Brands Global, Inc. (NYSE:DIN) was in 25 hedge funds' portfolios at the end of June. The all time high for this statistics is 21. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 21 hedge funds in our database with DIN positions at the end of the first quarter. Our calculations also showed that DIN isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Joel Greenblatt of Gotham Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind we're going to take a glance at the key hedge fund action regarding Dine Brands Global, Inc. (NYSE:DIN).
Hedge fund activity in Dine Brands Global, Inc. (NYSE:DIN)
At the end of June, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in DIN a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
The largest stake in Dine Brands Global, Inc. (NYSE:DIN) was held by MSD Capital, which reported holding $31.2 million worth of stock at the end of September. It was followed by Samlyn Capital with a $7.6 million position. Other investors bullish on the company included Arrowstreet Capital, Contrarius Investment Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position MSD Capital allocated the biggest weight to Dine Brands Global, Inc. (NYSE:DIN), around 79.21% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, dishing out 0.65 percent of its 13F equity portfolio to DIN.
As industrywide interest jumped, key money managers have jumped into Dine Brands Global, Inc. (NYSE:DIN) headfirst. Samlyn Capital, managed by Robert Pohly, established the largest position in Dine Brands Global, Inc. (NYSE:DIN). Samlyn Capital had $7.6 million invested in the company at the end of the quarter. Joel Greenblatt's Gotham Asset Management also made a $3.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Cliff Asness's AQR Capital Management, Noam Gottesman's GLG Partners, and Paul Tudor Jones's Tudor Investment Corp.
Let's now review hedge fund activity in other stocks similar to Dine Brands Global, Inc. (NYSE:DIN). We will take a look at Unisys Corporation (NYSE:UIS), Homology Medicines, Inc. (NASDAQ:FIXX), Federal Agricultural Mortgage Corp. (NYSE:AGM), OFG Bancorp (NYSE:OFG), Aerie Pharmaceuticals Inc (NASDAQ:AERI), Kearny Financial Corp. (NASDAQ:KRNY), and Republic Bancorp, Inc. (NASDAQ:RBCAA). This group of stocks' market values resemble DIN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UIS,19,59404,3 FIXX,16,52272,1 AGM,8,17724,-1 OFG,11,10553,-1 AERI,23,158080,-1 KRNY,21,79424,6 RBCAA,5,7119,0 Average,14.7,54939,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.7 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $73 million in DIN's case. Aerie Pharmaceuticals Inc (NASDAQ:AERI) is the most popular stock in this table. On the other hand Republic Bancorp, Inc (NASDAQ:RBCAA) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Dine Brands Global, Inc. (NYSE:DIN) is more popular among hedge funds. Our overall hedge fund sentiment score for DIN is 89. 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 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 returned 21.3% in 2020 through September 25th but still managed to beat the market by 17.7 percentage points. Hedge funds were also right about betting on DIN as the stock returned 31.2% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.