In this article we are going to use hedge fund sentiment as a tool and determine whether DuPont de Nemours Inc (NYSE:DD) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
DuPont de Nemours Inc (NYSE:DD) investors should pay attention to an increase in enthusiasm from smart money in recent months. DuPont de Nemours Inc (NYSE:DD) was in 64 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 82. Our calculations also showed that DD isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
To the average investor there are plenty of methods stock traders use to appraise publicly traded companies. Some of the most innovative methods are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the elite money managers can outperform the S&P 500 by a significant amount (see the details here).
Ricky Sandler of Eminence Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Keeping this in mind let’s take a glance at the fresh hedge fund action surrounding DuPont de Nemours Inc (NYSE:DD).
Hedge fund activity in DuPont de Nemours Inc (NYSE:DD)
At the end of June, a total of 64 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from one quarter earlier. By comparison, 42 hedge funds held shares or bullish call options in DD a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, 40 North Management was the largest shareholder of DuPont de Nemours Inc (NYSE:DD), with a stake worth $1076.7 million reported as of the end of September. Trailing 40 North Management was D E Shaw, which amassed a stake valued at $382.7 million. Eminence Capital, Maverick Capital, and Citadel Investment Group 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 40 North Management allocated the biggest weight to DuPont de Nemours Inc (NYSE:DD), around 32.96% of its 13F portfolio. Madison Avenue Partners is also relatively very bullish on the stock, designating 18.39 percent of its 13F equity portfolio to DD.
As industrywide interest jumped, key hedge funds have jumped into DuPont de Nemours Inc (NYSE:DD) headfirst. Point State Capital, managed by Zach Schreiber, assembled the most outsized position in DuPont de Nemours Inc (NYSE:DD). Point State Capital had $89.5 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also initiated a $79.7 million position during the quarter. The other funds with new positions in the stock are Schonfeld Strategic Advisors, Alexander Mitchell’s Scopus Asset Management, and William B. Gray’s Orbis Investment Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as DuPont de Nemours Inc (NYSE:DD) but similarly valued. We will take a look at The Kraft Heinz Company (NASDAQ:KHC), Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), DexCom, Inc. (NASDAQ:DXCM), Digital Realty Trust, Inc. (NYSE:DLR), Electronic Arts Inc. (NASDAQ:EA), BCE Inc. (NYSE:BCE), and General Mills, Inc. (NYSE:GIS). All of these stocks’ market caps resemble DD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KHC | 35 | 10727266 | -4 |
| SMFG | 10 | 101369 | 0 |
| DXCM | 55 | 1710751 | -3 |
| DLR | 26 | 274088 | -3 |
| EA | 67 | 1988616 | -6 |
| BCE | 10 | 176362 | -3 |
| GIS | 37 | 912759 | -2 |
| Average | 34.3 | 2270173 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.3 hedge funds with bullish positions and the average amount invested in these stocks was $2270 million. That figure was $3510 million in DD’s case. Electronic Arts Inc. (NASDAQ:EA) is the most popular stock in this table. On the other hand Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) is the least popular one with only 10 bullish hedge fund positions. DuPont de Nemours Inc (NYSE:DD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DD is 80.8. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 29.2% in 2020 through October 16th and beat the market by 19.7 percentage points. Unfortunately DD wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on DD were disappointed as the stock returned 12% since the end of June (through 10/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
