Is DMC Global Inc. (BOOM) A Good Stock To Buy?

Asma UL Husna

Sun, Jun 23, 2019, 6:52 PM

Is DMC Global Inc. (NASDAQ:BOOM) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

DMC Global Inc. (NASDAQ:BOOM) was in 14 hedge funds' portfolios at the end of the first quarter of 2019. BOOM investors should pay attention to an increase in hedge fund interest lately. There were 12 hedge funds in our database with BOOM holdings at the end of the previous quarter. Our calculations also showed that BOOM isn't among the 30 most popular stocks among hedge funds.

To most traders, hedge funds are perceived as slow, outdated investment tools of years past. While there are over 8000 funds with their doors open at present, Our researchers hone in on the masters of this group, about 750 funds. These money managers administer bulk of the hedge fund industry's total capital, and by monitoring their finest investments, Insider Monkey has brought to light numerous investment strategies that have historically outrun the S&P 500 index. Insider Monkey's flagship hedge fund strategy defeated the S&P 500 index by around 5 percentage points a year 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 review the key hedge fund action regarding DMC Global Inc. (NASDAQ:BOOM).

How are hedge funds trading DMC Global Inc. (NASDAQ:BOOM)?

Heading into the second quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in BOOM a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of DMC Global Inc. (NASDAQ:BOOM), with a stake worth $21.6 million reported as of the end of March. Trailing Renaissance Technologies was Encompass Capital Advisors, which amassed a stake valued at $15.8 million. Nokomis Capital, Driehaus Capital, and Manatuck Hill Partners were also very fond of the stock, giving the stock large weights in their portfolios.

Consequently, key hedge funds were leading the bulls' herd. Driehaus Capital, managed by Richard Driehaus, established the most outsized position in DMC Global Inc. (NASDAQ:BOOM). Driehaus Capital had $10.8 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also made a $1.6 million investment in the stock during the quarter. The following funds were also among the new BOOM investors: Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, David Harding's Winton Capital Management, and Ken Griffin's Citadel Investment Group.

Let's now review hedge fund activity in other stocks similar to DMC Global Inc. (NASDAQ:BOOM). These stocks are Party City Holdco Inc (NYSE:PRTY), Everi Holdings Inc (NYSE:EVRI), INTL Fcstone Inc (NASDAQ:INTL), and Verso Corporation (NYSE:VRS). This group of stocks' market caps are similar to BOOM's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRTY,19,69139,1 EVRI,26,244606,0 INTL,15,78246,2 VRS,24,142939,2 Average,21,133733,1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $134 million. That figure was $87 million in BOOM's case. Everi Holdings Inc (NYSE:EVRI) is the most popular stock in this table. On the other hand INTL Fcstone Inc (NASDAQ:INTL) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks DMC Global Inc. (NASDAQ:BOOM) is even less popular than INTL. Hedge funds clearly dropped the ball on BOOM as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on BOOM as the stock returned 24.7% during the same period and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.

Related Content