Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. The second half of 2015 and the first few months of this year was a stressful period for hedge funds. However, things have been taking a turn for the better in the second half of this year. Small-cap stocks which hedge funds are usually overweight outperformed the market by double digits and it may be a good time to pay attention to hedge funds’ picks before it is too late. In this article we are going to analyze the hedge fund sentiment towards Davita Inc (NYSE:DVA) to find out whether it was one of their high conviction long-term ideas.
Is Davita Inc (NYSE:DVA) a sound investment now? The smart money is selling. The number of bullish hedge fund positions dropped by 1 in recent months. DVA was in 36 hedge funds’ portfolios at the end of the third quarter of 2016. There were 37 hedge funds in our database with DVA holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Goldcorp Inc. (USA) (NYSE:GG), CenturyLink, Inc. (NYSE:CTL), and Expedia Inc (NASDAQ:EXPE) to gather more data points.
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How have hedgies been trading Davita Inc (NYSE:DVA)?
Heading into the fourth quarter of 2016, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 3% drop from the second quarter of 2016. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Warren Buffett’s Berkshire Hathaway has the largest position in Davita Inc (NYSE:DVA), worth close to $2.55 billion, amounting to 2% of its total 13F portfolio. Sitting at the No. 2 spot is D E Shaw, founded by David E. Shaw, holding a $127.1 million position. Other professional money managers with similar optimism consist of Jeffrey Gates’ Gates Capital Management, Jim Simons’ Renaissance Technologies, and Israel Englander’s Millennium Management.
Due to the fact that Davita Inc (NYSE:DVA) has experienced a decline in interest from the smart money, we can see that there is a sect of hedge funds that decided to sell off their full holdings by the end of the third quarter. Interestingly, Andreas Halvorsen’s Viking Global sold off the biggest investment of the “upper crust” of funds monitored by Insider Monkey, worth about $356.6 million in stock, and John Armitage’s Egerton Capital Limited was right behind this move, as the fund dumped about $263.4 million worth of shares. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 fund by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Davita Inc (NYSE:DVA). These stocks are Goldcorp Inc. (USA) (NYSE:GG), CenturyLink, Inc. (NYSE:CTL), Expedia Inc (NASDAQ:EXPE), and Liberty Interactive Corp (NASDAQ:QVCA). All of these stocks’ market caps are closest to DVA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GG | 24 | 311237 | -4 |
| CTL | 29 | 395238 | 1 |
| EXPE | 62 | 4768237 | -5 |
| QVCA | 77 | 3079369 | 2 |
As you can see these stocks had an average of 48 hedge funds with bullish positions and the average amount invested in these stocks was $2.14 billion. That figure was $3.42 billion in DVA’s case. Liberty Interactive Corp (NASDAQ:QVCA) is the most popular stock in this table. On the other hand Goldcorp Inc. (USA) (NYSE:GG) is the least popular one with only 24 bullish hedge fund positions. Davita Inc (NYSE:DVA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard QVCA might be a better candidate to consider a long position.
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