The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded DXC Technology Company (NYSE:DXC) based on those filings.
DXC Technology Company (NYSE:DXC) investors should pay attention to a decrease in hedge fund interest in recent months. DXC was in 41 hedge funds’ portfolios at the end of the first quarter of 2020. There were 47 hedge funds in our database with DXC positions at the end of the previous quarter. Our calculations also showed that DXC isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
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 44 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Alexander Roepers of Atlantic Investment Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s analyze the key hedge fund action regarding DXC Technology Company (NYSE:DXC).
What have hedge funds been doing with DXC Technology Company (NYSE:DXC)?
At Q1’s end, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DXC over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
The largest stake in DXC Technology Company (NYSE:DXC) was held by Glenview Capital, which reported holding $143.4 million worth of stock at the end of September. It was followed by Maverick Capital with a $46.9 million position. Other investors bullish on the company included Atlantic Investment Management, Miller Value Partners, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Atlantic Investment Management allocated the biggest weight to DXC Technology Company (NYSE:DXC), around 19.3% of its 13F portfolio. Clearline Capital is also relatively very bullish on the stock, setting aside 6.26 percent of its 13F equity portfolio to DXC.
Since DXC Technology Company (NYSE:DXC) has experienced declining sentiment from hedge fund managers, we can see that there lies a certain “tier” of hedgies that elected to cut their positions entirely heading into Q4. Intriguingly, Doug Silverman and Alexander Klabin’s Senator Investment Group said goodbye to the largest position of all the hedgies monitored by Insider Monkey, comprising close to $75.2 million in stock. James Parsons’s fund, Junto Capital Management, also dropped its stock, about $49.1 million worth. These moves are interesting, as total hedge fund interest was cut by 6 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as DXC Technology Company (NYSE:DXC) but similarly valued. We will take a look at Vedanta Ltd (NYSE:VEDL), Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), ADT Inc. (NYSE:ADT), and Williams-Sonoma, Inc. (NYSE:WSM). This group of stocks’ market caps match DXC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VEDL | 11 | 26697 | -2 |
| AJRD | 23 | 422895 | 2 |
| ADT | 20 | 98631 | -1 |
| WSM | 26 | 182192 | -3 |
| Average | 20 | 182604 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $183 million. That figure was $383 million in DXC’s case. Williams-Sonoma, Inc. (NYSE:WSM) is the most popular stock in this table. On the other hand Vedanta Ltd (NYSE:VEDL) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks DXC Technology Company (NYSE:DXC) is more popular among hedge funds. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately DXC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on DXC were disappointed as the stock returned 8.9% during the second quarter (through the end of May) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
