The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their March 31 holdings, data that is available nowhere else. Should you consider Digi International Inc. (NASDAQ:DGII) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Digi International Inc. (NASDAQ:DGII) has seen an increase in enthusiasm from smart money of late. DGII was in 15 hedge funds' portfolios at the end of the first quarter of 2019. There were 11 hedge funds in our database with DGII holdings at the end of the previous quarter. Our calculations also showed that DGII isn't among the 30 most popular stocks among hedge funds.
If you'd ask most investors, hedge funds are assumed to be slow, outdated financial tools of the past. While there are greater than 8000 funds trading at the moment, Our researchers look at the masters of this club, around 750 funds. These hedge fund managers control the majority of the hedge fund industry's total capital, and by tracking their best equity investments, Insider Monkey has unearthed various investment strategies that have historically outpaced the market. Insider Monkey's flagship hedge fund strategy outrun the S&P 500 index by around 5 percentage points annually since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).
We're going to review the latest hedge fund action surrounding Digi International Inc. (NASDAQ:DGII).
How are hedge funds trading Digi International Inc. (NASDAQ:DGII)?
At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 36% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in DGII over the last 15 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of Digi International Inc. (NASDAQ:DGII), with a stake worth $11.2 million reported as of the end of March. Trailing Royce & Associates was Renaissance Technologies, which amassed a stake valued at $8.5 million. North Run Capital, Arrowstreet Capital, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, some big names were leading the bulls' herd. North Run Capital, managed by Thomas Ellis and Todd Hammer, initiated the most valuable position in Digi International Inc. (NASDAQ:DGII). North Run Capital had $7.5 million invested in the company at the end of the quarter. Cliff Asness's AQR Capital Management also initiated a $1.6 million position during the quarter. The other funds with brand new DGII positions are David Harding's Winton Capital Management, Peter Algert and Kevin Coldiron's Algert Coldiron Investors, and Peter Muller's PDT Partners.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Digi International Inc. (NASDAQ:DGII) but similarly valued. We will take a look at Inseego Corp. (NASDAQ:INSG), Armstrong Flooring, Inc. (NYSE:AFI), Constellation Pharmaceuticals, Inc. (NASDAQ:CNST), and Carriage Services, Inc. (NYSE:CSV). This group of stocks' market values match DGII's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INSG,15,33006,4 AFI,12,141658,-1 CNST,8,60492,0 CSV,8,33703,-1 Average,10.75,67215,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $67 million. That figure was $42 million in DGII's case. Inseego Corp. (NASDAQ:INSG) is the most popular stock in this table. On the other hand Constellation Pharmaceuticals, Inc. (NASDAQ:CNST) is the least popular one with only 8 bullish hedge fund positions. Digi International Inc. (NASDAQ:DGII) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately DGII wasn't nearly as popular as these 20 stocks and hedge funds that were betting on DGII were disappointed as the stock returned -6.4% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.