At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of March 31. In this article, we will use that wealth of knowledge to determine whether or not Diplomat Pharmacy Inc (NYSE:DPLO) makes for a good investment right now.
Is Diplomat Pharmacy Inc (NYSE:DPLO) going to take off soon? Investors who are in the know are turning bullish. The number of long hedge fund positions rose by 4 in recent months. Our calculations also showed that DPLO isn't among the 30 most popular stocks among hedge funds.
In the eyes of most traders, hedge funds are assumed to be underperforming, outdated investment vehicles of the past. While there are more than 8000 funds in operation at present, Our experts look at the aristocrats of this club, around 750 funds. Most estimates calculate that this group of people direct most of the hedge fund industry's total capital, and by shadowing their finest picks, Insider Monkey has brought to light various investment strategies that have historically exceeded the market. Insider Monkey's flagship hedge fund strategy outstripped the S&P 500 index by around 5 percentage points per annum 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).
Let's take a look at the latest hedge fund action encompassing Diplomat Pharmacy Inc (NYSE:DPLO).
Hedge fund activity in Diplomat Pharmacy Inc (NYSE:DPLO)
Heading into the second quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 40% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in DPLO a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Deerfield Management was the largest shareholder of Diplomat Pharmacy Inc (NYSE:DPLO), with a stake worth $41 million reported as of the end of March. Trailing Deerfield Management was Armistice Capital, which amassed a stake valued at $17.4 million. Millennium Management, D E Shaw, and Balyasny Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Armistice Capital, managed by Steven Boyd, established the most valuable position in Diplomat Pharmacy Inc (NYSE:DPLO). Armistice Capital had $17.4 million invested in the company at the end of the quarter. Anand Parekh's Alyeska Investment Group also made a $1.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Benjamin A. Smith's Laurion Capital Management, Jim Simons's Renaissance Technologies, and Hoon Kim's Quantinno Capital.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Diplomat Pharmacy Inc (NYSE:DPLO) but similarly valued. We will take a look at Golden Star Resources Ltd. (NYSE:GSS), Global Indemnity Limited (NASDAQ:GBLI), VirnetX Holding Corporation (NYSE:VHC), and The KEYW Holding Corp. (NASDAQ:KEYW). This group of stocks' market values match DPLO's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GSS,3,10870,-1 GBLI,6,35423,1 VHC,2,615,1 KEYW,12,23311,3 Average,5.75,17555,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.75 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $86 million in DPLO's case. The KEYW Holding Corp. (NASDAQ:KEYW) is the most popular stock in this table. On the other hand VirnetX Holding Corporation (NYSE:VHC) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Diplomat Pharmacy Inc (NYSE:DPLO) is more popular among hedge funds. 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 DPLO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on DPLO were disappointed as the stock returned -14.6% 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 in Q2.
Disclosure: None. This article was originally published at Insider Monkey.