Hedge Funds Are Buying Dover Corporation (DOV)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about Dover Corporation (NYSE:DOV)?

Dover Corporation (NYSE:DOV) investors should be aware of an increase in hedge fund sentiment in recent months. DOV was in 31 hedge funds’ portfolios at the end of the first quarter of 2020. There were 29 hedge funds in our database with DOV positions at the end of the previous quarter. Our calculations also showed that DOV 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 51 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. 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. Keeping this in mind let’s analyze the new hedge fund action regarding Dover Corporation (NYSE:DOV).

How have hedgies been trading Dover Corporation (NYSE:DOV)?

At Q1’s end, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. On the other hand, there were a total of 30 hedge funds with a bullish position in DOV a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Dover Corporation (NYSE:DOV) was held by Citadel Investment Group, which reported holding $248.9 million worth of stock at the end of September. It was followed by Adage Capital Management with a $148.9 million position. Other investors bullish on the company included Balyasny Asset Management, D E Shaw, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Sustainable Insight Capital Management allocated the biggest weight to Dover Corporation (NYSE:DOV), around 2.74% of its 13F portfolio. Scopus Asset Management is also relatively very bullish on the stock, earmarking 1.31 percent of its 13F equity portfolio to DOV.

As aggregate interest increased, some big names were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, established the most valuable position in Dover Corporation (NYSE:DOV). Balyasny Asset Management had $36.5 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $30.7 million position during the quarter. The other funds with brand new DOV positions are Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, and Andrew Weiss’s Weiss Asset Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Dover Corporation (NYSE:DOV) but similarly valued. These stocks are Healthpeak Properties, Inc. (NYSE:PEAK), Restaurant Brands International Inc (NYSE:QSR), Lennar Corporation (NYSE:LEN), and Duke Realty Corporation (NYSE:DRE). This group of stocks’ market valuations are closest to DOV’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $932 million. That figure was $645 million in DOV’s case. Lennar Corporation (NYSE:LEN) is the most popular stock in this table. On the other hand Duke Realty Corporation (NYSE:DRE) is the least popular one with only 16 bullish hedge fund positions. Dover Corporation (NYSE:DOV) 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. 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 surpassed the market by 13.2 percentage points. Unfortunately DOV wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); DOV investors were disappointed as the stock returned 16.4% during the second quarter 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.

Disclosure: None. This article was originally published at Insider Monkey.