Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. After several tireless days we have finished crunching the numbers from nearly 835 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Digital Realty Trust, Inc. (NYSE:DLR).
Digital Realty Trust, Inc. (NYSE:DLR) was in 26 hedge funds’ portfolios at the end of the fourth quarter of 2019. DLR investors should be aware of an increase in support from the world’s most elite money managers in recent months. There were 19 hedge funds in our database with DLR positions at the end of the previous quarter. Our calculations also showed that DLR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to 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 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a glance at the latest hedge fund action regarding Digital Realty Trust, Inc. (NYSE:DLR).
What does smart money think about Digital Realty Trust, Inc. (NYSE:DLR)?
At Q4’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 37% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DLR over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jet Capital Investors, managed by Matthew Mark, holds the most valuable position in Digital Realty Trust, Inc. (NYSE:DLR). Jet Capital Investors has a $38.5 million call position in the stock, comprising 7.3% of its 13F portfolio. On Jet Capital Investors’s heels is Osterweis Capital Management, led by John Osterweis, holding a $31.2 million position; 2.2% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions encompass Ken Griffin’s Citadel Investment Group, Cliff Asness’s AQR Capital Management and Matthew Tewksbury’s Stevens Capital Management. In terms of the portfolio weights assigned to each position Jet Capital Investors allocated the biggest weight to Digital Realty Trust, Inc. (NYSE:DLR), around 7.33% of its 13F portfolio. Osterweis Capital Management is also relatively very bullish on the stock, designating 2.16 percent of its 13F equity portfolio to DLR.
As aggregate interest increased, some big names have jumped into Digital Realty Trust, Inc. (NYSE:DLR) headfirst. Citadel Investment Group, managed by Ken Griffin, initiated the most outsized position in Digital Realty Trust, Inc. (NYSE:DLR). Citadel Investment Group had $29.9 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also made a $19.6 million investment in the stock during the quarter. The other funds with brand new DLR positions are Carl Tiedemann and Michael Tiedemann’s TIG Advisors, Israel Englander’s Millennium Management, and Mark Wolfson and Jamie Alexander’s Jasper Ridge Partners.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Digital Realty Trust, Inc. (NYSE:DLR) but similarly valued. We will take a look at FleetCor Technologies, Inc. (NYSE:FLT), DTE Energy Company (NYSE:DTE), McKesson Corporation (NYSE:MCK), and Twitter Inc (NYSE:TWTR). All of these stocks’ market caps are closest to DLR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FLT | 44 | 2121544 | -1 |
| DTE | 35 | 1090279 | 12 |
| MCK | 51 | 2268968 | 6 |
| TWTR | 55 | 1427081 | 0 |
| Average | 46.25 | 1726968 | 4.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 46.25 hedge funds with bullish positions and the average amount invested in these stocks was $1727 million. That figure was $175 million in DLR’s case. Twitter Inc (NYSE:TWTR) is the most popular stock in this table. On the other hand DTE Energy Company (NYSE:DTE) is the least popular one with only 35 bullish hedge fund positions. Compared to these stocks Digital Realty Trust, Inc. (NYSE:DLR) is even less popular than DTE. Hedge funds clearly dropped the ball on DLR 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but still beat the market by 3.1 percentage points. A small number of hedge funds were also right about betting on DLR as the stock returned 14.4% during the same time period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
