It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 31% in 2019 (through December 23rd). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.1% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like E I Du Pont De Nemours And Co (NYSE:DD).
Is E I Du Pont De Nemours And Co (NYSE:DD) an exceptional investment now? Money managers are turning bullish. The number of long hedge fund positions went up by 5 in recent months. Our calculations also showed that DD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
To the average investor there are numerous gauges shareholders can use to appraise their holdings. A couple of the best gauges are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the top money managers can outpace the broader indices by a healthy amount (see the details here).
Lee Ainslie of Maverick Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to check out the fresh hedge fund action regarding E I Du Pont De Nemours And Co (NYSE:DD).
Hedge fund activity in E I Du Pont De Nemours And Co (NYSE:DD)
Heading into the fourth quarter of 2019, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the previous quarter. By comparison, 69 hedge funds held shares or bullish call options in DD a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Among these funds, Maverick Capital held the most valuable stake in E I Du Pont De Nemours And Co (NYSE:DD), which was worth $415.2 million at the end of the third quarter. On the second spot was Levin Easterly Partners which amassed $151.9 million worth of shares. Citadel Investment Group, D E Shaw, and Adage Capital Management 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 Bodenholm Capital allocated the biggest weight to E I Du Pont De Nemours And Co (NYSE:DD), around 13.74% of its 13F portfolio. Maverick Capital is also relatively very bullish on the stock, dishing out 6.1 percent of its 13F equity portfolio to DD.
Now, specific money managers were breaking ground themselves. Two Sigma Advisors, managed by John Overdeck and David Siegel, established the most outsized position in E I Du Pont De Nemours And Co (NYSE:DD). Two Sigma Advisors had $38.5 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also made a $30.2 million investment in the stock during the quarter. The following funds were also among the new DD investors: Alexander Mitchell’s Scopus Asset Management, Vince Maddi and Shawn Brennan’s SIR Capital Management, and David Costen Haley’s HBK Investments.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as E I Du Pont De Nemours And Co (NYSE:DD) but similarly valued. These stocks are Deere & Company (NYSE:DE), Brookfield Asset Management Inc. (NYSE:BAM), General Dynamics Corporation (NYSE:GD), and HDFC Bank Limited (NYSE:HDB). This group of stocks’ market values match DD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DE | 40 | 1818266 | 0 |
| BAM | 31 | 1142775 | 9 |
| GD | 40 | 7033615 | 0 |
| HDB | 36 | 2347772 | 9 |
| Average | 36.75 | 3085607 | 4.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.75 hedge funds with bullish positions and the average amount invested in these stocks was $3086 million. That figure was $1502 million in DD’s case. Deere & Company (NYSE:DE) is the most popular stock in this table. On the other hand Brookfield Asset Management Inc. (NYSE:BAM) is the least popular one with only 31 bullish hedge fund positions. Compared to these stocks E I Du Pont De Nemours And Co (NYSE:DD) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately DD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on DD were disappointed as the stock returned -14.6% so far in 2019 (through 12/23) and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks already outperformed the market in 2019.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
