Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Dycom Industries, Inc. (NYSE:DY), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Dycom Industries, Inc. (NYSE:DY) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 19 hedge funds' portfolios at the end of March. Our calculations also showed that DY isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as California Water Service Group (NYSE:CWT), Cornerstone OnDemand, Inc. (NASDAQ:CSOD), and ESCO Technologies Inc. (NYSE:ESE) to gather more data points.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Robert Pohly of Samlyn Capital
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Do Hedge Funds Think DY Is A Good Stock To Buy Now?
At first quarter's end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DY over the last 23 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Peconic Partners LLC held the most valuable stake in Dycom Industries, Inc. (NYSE:DY), which was worth $67.6 million at the end of the fourth quarter. On the second spot was Hill City Capital which amassed $51.4 million worth of shares. Samlyn Capital, Millennium Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Hill City Capital allocated the biggest weight to Dycom Industries, Inc. (NYSE:DY), around 15.75% of its 13F portfolio. ACK Asset Management is also relatively very bullish on the stock, earmarking 7.22 percent of its 13F equity portfolio to DY.
Seeing as Dycom Industries, Inc. (NYSE:DY) has experienced a decline in interest from hedge fund managers, it's safe to say that there were a few funds who were dropping their positions entirely by the end of the first quarter. Interestingly, Sander Gerber's Hudson Bay Capital Management said goodbye to the biggest investment of all the hedgies watched by Insider Monkey, totaling close to $6 million in stock. John Overdeck and David Siegel's fund, Two Sigma Advisors, also cut its stock, about $2.3 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Dycom Industries, Inc. (NYSE:DY) but similarly valued. We will take a look at California Water Service Group (NYSE:CWT), Cornerstone OnDemand, Inc. (NASDAQ:CSOD), ESCO Technologies Inc. (NYSE:ESE), PJT Partners Inc (NYSE:PJT), 2U Inc (NASDAQ:TWOU), Editas Medicine, Inc. (NASDAQ:EDIT), and Masonite International Corp (NYSE:DOOR). This group of stocks' market valuations resemble DY's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CWT,8,100631,-2 CSOD,28,652188,-6 ESE,8,85089,-5 PJT,22,90165,0 TWOU,23,745360,1 EDIT,24,471562,7 DOOR,31,405857,3 Average,20.6,364407,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.6 hedge funds with bullish positions and the average amount invested in these stocks was $364 million. That figure was $277 million in DY's case. Masonite International Corp (NYSE:DOOR) is the most popular stock in this table. On the other hand California Water Service Group (NYSE:CWT) is the least popular one with only 8 bullish hedge fund positions. Dycom Industries, Inc. (NYSE:DY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DY is 45.7. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately DY wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); DY investors were disappointed as the stock returned -28.6% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.