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Should You Be Tempted To ‘Sell’ Discover Financial Services (DFS) Stock

Diamond Hill Capital recently released its Q1 2020 Investor Letter, a copy of which you can download below. The Diamond Hill Small Cap Fund posted a return of -36.17% for the quarter, underperforming its benchmark, the Russell 2000 Index which returned -30.61% in the same quarter. You should check out Diamond Hill Capital's top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.

In the said letter, Diamond Hill Capital highlighted a few stocks and Discover Financial Services (NYSE:DFS) is one of them. Discover Financial Services is a financial services company. Year-to-date, Discover Financial Services (NYSE:DFS) stock lost 32.5% and on June 3rd it had a closing price of $57.14. Here is what Diamond Hill Capital said:

"Shares of banking and payment services company Discover Financial Services underperformed amid investor concerns about its core consumer finance business, which could be negatively impacted by the economic fallout from COVID-19."

In Q1 2020, the number of bullish hedge fund positions on Discover Financial Services (NYSE:DFS) stock increased by about 3% from the previous quarter (see the chart here), so a number of other hedge fund managers don't seem to agree with DFS's downside potential. Our calculations showed that Discover Financial Services (NYSE:DFS) isn't among the 30 most popular stocks among hedge funds.

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