We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like DSP Group, Inc. (NASDAQ:DSPG).
Is DSP Group, Inc. (NASDAQ:DSPG) a buy, sell, or hold? Hedge funds are in a bullish mood. The number of bullish hedge fund bets inched up by 1 recently. Our calculations also showed that DSPG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). DSPG was in 16 hedge funds' portfolios at the end of the third quarter of 2019. There were 15 hedge funds in our database with DSPG holdings at the end of the previous quarter. Video: Click the image to 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 has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/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 glance at the fresh hedge fund action surrounding DSP Group, Inc. (NASDAQ:DSPG).
Hedge fund activity in DSP Group, Inc. (NASDAQ:DSPG)
Heading into the fourth quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the second quarter of 2019. On the other hand, there were a total of 11 hedge funds with a bullish position in DSPG a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
The largest stake in DSP Group, Inc. (NASDAQ:DSPG) was held by Renaissance Technologies, which reported holding $15.2 million worth of stock at the end of September. It was followed by Rima Senvest Management with a $13.6 million position. Other investors bullish on the company included Raging Capital Management, Lynrock Lake, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Raging Capital Management allocated the biggest weight to DSP Group, Inc. (NASDAQ:DSPG), around 1.68% of its 13F portfolio. Rima Senvest Management is also relatively very bullish on the stock, setting aside 1.17 percent of its 13F equity portfolio to DSPG.
Now, specific money managers were breaking ground themselves. Winton Capital Management, managed by David Harding, created the largest position in DSP Group, Inc. (NASDAQ:DSPG). Winton Capital Management had $1.7 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace also made a $0.8 million investment in the stock during the quarter. The only other fund with a new position in the stock is Cliff Asness's AQR Capital Management.
Let's go over hedge fund activity in other stocks similar to DSP Group, Inc. (NASDAQ:DSPG). We will take a look at PolyMet Mining Corp. (NYSEAMEX:PLM), NVE Corporation (NASDAQ:NVEC), Ryerson Holding Corporation (NYSE:RYI), and Pulse Biosciences, Inc (NASDAQ:PLSE). This group of stocks' market values are similar to DSPG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PLM,2,463,-1 NVEC,11,24069,4 RYI,13,11101,-3 PLSE,1,232,0 Average,6.75,8966,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $53 million in DSPG's case. Ryerson Holding Corporation (NYSE:RYI) is the most popular stock in this table. On the other hand Pulse Biosciences, Inc (NASDAQ:PLSE) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks DSP Group, Inc. (NASDAQ:DSPG) is more popular among hedge funds. 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. Unfortunately DSPG wasn't nearly as popular as these 20 stocks and hedge funds that were betting on DSPG were disappointed as the stock returned 0.6% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.