We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Dell Technologies Inc. (NYSE:DELL).
Is Dell Technologies Inc. (NYSE:DELL) the right pick for your portfolio? Investors who are in the know are getting less bullish. The number of long hedge fund positions were cut by 6 recently. Our calculations also showed that dell isn’t among the 30 most popular stocks among hedge funds. DELL was in 37 hedge funds’ portfolios at the end of the first quarter of 2019. There were 43 hedge funds in our database with DELL positions at the end of the previous quarter.
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Noam Gottesman, GLG Partners
We’re going to take a look at the recent hedge fund action surrounding Dell Technologies Inc. (NYSE:DELL).
What does the smart money think about Dell Technologies Inc. (NYSE:DELL)?
At the end of the first quarter, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DELL over the last 15 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Elliott Management, managed by Paul Singer, holds the biggest position in Dell Technologies Inc. (NYSE:DELL). Elliott Management has a $658.2 million position in the stock, comprising 4.1% of its 13F portfolio. The second most bullish fund manager is Canyon Capital Advisors, managed by Joshua Friedman and Mitchell Julis, which holds a $206.9 million position; the fund has 5% of its 13F portfolio invested in the stock. Some other peers that are bullish comprise Jim Simons’s Renaissance Technologies, Noam Gottesman’s GLG Partners and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Due to the fact that Dell Technologies Inc. (NYSE:DELL) has faced a decline in interest from hedge fund managers, we can see that there were a few hedge funds that slashed their positions entirely heading into Q3. It’s worth mentioning that Carl Icahn’s Icahn Capital LP dropped the largest stake of the 700 funds monitored by Insider Monkey, worth an estimated $625.5 million in stock, and Thomas Steyer’s Farallon Capital was right behind this move, as the fund dumped about $174.6 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 6 funds heading into Q3.
Let’s now take a look at hedge fund activity in other stocks similar to Dell Technologies Inc. (NYSE:DELL). We will take a look at The Progressive Corporation (NYSE:PGR), Emerson Electric Co. (NYSE:EMR), Altaba Inc. (NASDAQ:AABA), and Relx PLC (NYSE:RELX). This group of stocks’ market valuations resemble DELL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PGR | 44 | 1917725 | -4 |
| EMR | 44 | 961297 | 10 |
| AABA | 76 | 15298507 | 3 |
| RELX | 7 | 97404 | 2 |
| Average | 42.75 | 4568733 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.75 hedge funds with bullish positions and the average amount invested in these stocks was $4569 million. That figure was $1817 million in DELL’s case. Altaba Inc. (NASDAQ:AABA) is the most popular stock in this table. On the other hand Relx PLC (NYSE:RELX) is the least popular one with only 7 bullish hedge fund positions. Dell Technologies Inc. (NYSE:DELL) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on DELL as the stock returned 13.2% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
