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 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Danaos Corporation (NYSE:DAC) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Danaos Corporation (NYSE:DAC) has seen an increase in hedge fund interest lately. Danaos Corporation (NYSE:DAC) was in 6 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 6. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that DAC isn't among the 30 most popular stocks among hedge funds (click for Q3 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 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ian Wace of Marshall Wace
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. With all of this in mind let's take a look at the fresh hedge fund action surrounding Danaos Corporation (NYSE:DAC).
What does smart money think about Danaos Corporation (NYSE:DAC)?
At Q3's end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DAC over the last 21 quarters. With the smart money's capital changing hands, there exists an "upper tier" of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, No Street Capital was the largest shareholder of Danaos Corporation (NYSE:DAC), with a stake worth $8.8 million reported as of the end of September. Trailing No Street Capital was Lonestar Capital Management, which amassed a stake valued at $3.5 million. Arrowstreet Capital, Marshall Wace LLP, and Millennium Management 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 No Street Capital allocated the biggest weight to Danaos Corporation (NYSE:DAC), around 1.04% of its 13F portfolio. Lonestar Capital Management is also relatively very bullish on the stock, setting aside 0.6 percent of its 13F equity portfolio to DAC.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the biggest position in Danaos Corporation (NYSE:DAC). Marshall Wace LLP had $0.3 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $0.1 million investment in the stock during the quarter. The only other fund with a new position in the stock is Greg Eisner's Engineers Gate Manager.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Danaos Corporation (NYSE:DAC) but similarly valued. These stocks are SM Energy Company (NYSE:SM), Rocky Brands, Inc. (NASDAQ:RCKY), SuRo Capital Corp. (NASDAQ:SSSS), Spok Holdings Inc (NASDAQ:SPOK), Exfo Inc (NASDAQ:EXFO), ACNB Corporation (NASDAQ:ACNB), and Avenue Therapeutics, Inc. (NASDAQ:ATXI). This group of stocks' market caps match DAC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SM,15,29654,-3 RCKY,8,13590,1 SSSS,8,8762,2 SPOK,14,20602,2 EXFO,1,3274,0 ACNB,1,1084,0 ATXI,2,11486,0 Average,7,12636,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $14 million in DAC's case. SM Energy Company (NYSE:SM) is the most popular stock in this table. On the other hand Exfo Inc (NASDAQ:EXFO) is the least popular one with only 1 bullish hedge fund positions. Danaos Corporation (NYSE:DAC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DAC is 54.9. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on DAC as the stock returned 82.8% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.