Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Diversey Holdings, Ltd. (NASDAQ:DSEY).
Is Diversey Holdings, Ltd. (NASDAQ:DSEY) a buy here? Prominent investors were taking an optimistic view. The number of bullish hedge fund bets increased by 21 recently. Diversey Holdings, Ltd. (NASDAQ:DSEY) was in 21 hedge funds’ portfolios at the end of March. Our calculations also showed that DSEY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Dmitry Balyasny of Balyasny Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s review the fresh hedge fund action regarding Diversey Holdings, Ltd. (NASDAQ:DSEY).
Do Hedge Funds Think DSEY Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 21 from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DSEY over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Diversey Holdings, Ltd. (NASDAQ:DSEY) was held by Citadel Investment Group, which reported holding $74.5 million worth of stock at the end of December. It was followed by Zimmer Partners with a $44.2 million position. Other investors bullish on the company included Millennium Management, Balyasny Asset Management, and Covalis Capital. In terms of the portfolio weights assigned to each position Covalis Capital allocated the biggest weight to Diversey Holdings, Ltd. (NASDAQ:DSEY), around 4.45% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, dishing out 0.6 percent of its 13F equity portfolio to DSEY.
Now, specific money managers have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, assembled the largest position in Diversey Holdings, Ltd. (NASDAQ:DSEY). Citadel Investment Group had $74.5 million invested in the company at the end of the quarter. Stuart J. Zimmer’s Zimmer Partners also initiated a $44.2 million position during the quarter. The following funds were also among the new DSEY investors: Israel Englander’s Millennium Management, Dmitry Balyasny’s Balyasny Asset Management, and Zilvinas Mecelis’s Covalis Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Diversey Holdings, Ltd. (NASDAQ:DSEY) but similarly valued. We will take a look at Schneider National, Inc. (NYSE:SNDR), Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN), Sunnova Energy International Inc. (NYSE:NOVA), Ormat Technologies, Inc. (NYSE:ORA), Everbridge, Inc. (NASDAQ:EVBG), Navistar International Corp (NYSE:NAV), and Workiva Inc (NYSE:WK). This group of stocks’ market values are similar to DSEY’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SNDR | 19 | 127648 | -1 |
| BHVN | 33 | 359789 | -6 |
| NOVA | 26 | 327923 | -6 |
| ORA | 17 | 251963 | 1 |
| EVBG | 49 | 1083099 | 13 |
| NAV | 21 | 2077934 | -8 |
| WK | 22 | 438709 | 3 |
| Average | 26.7 | 666724 | -0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.7 hedge funds with bullish positions and the average amount invested in these stocks was $667 million. That figure was $284 million in DSEY’s case. Everbridge, Inc. (NASDAQ:EVBG) is the most popular stock in this table. On the other hand Ormat Technologies, Inc. (NYSE:ORA) is the least popular one with only 17 bullish hedge fund positions. Diversey Holdings, Ltd. (NASDAQ:DSEY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DSEY is 20. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market by 7.7 percentage points. A small number of hedge funds were also right about betting on DSEY, though not to the same extent, as the stock returned 11.4% since the end of Q1 (through July 16th) and outperformed the market.
Follow Diversey Holdings Ltd.
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Disclosure: None. This article was originally published at Insider Monkey.