How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding DuPont de Nemours Inc (NYSE:DD) and determine whether hedge funds had an edge regarding this stock.
DuPont de Nemours Inc (NYSE:DD) shareholders have witnessed an increase in hedge fund sentiment of late. DuPont de Nemours Inc (NYSE:DD) was in 64 hedge funds’ portfolios at the end of June. The all time high for this statistics is 82. Our calculations also showed that DD isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
According to most shareholders, hedge funds are assumed to be worthless, outdated investment vehicles of the past. While there are greater than 8000 funds in operation at the moment, Our experts look at the top tier of this club, around 850 funds. Most estimates calculate that this group of people control the lion’s share of all hedge funds’ total capital, and by watching their best picks, Insider Monkey has discovered many investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
David S. Winter of 40 North Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind let’s take a peek at the new hedge fund action surrounding DuPont de Nemours Inc (NYSE:DD).
Hedge fund activity in DuPont de Nemours Inc (NYSE:DD)
Heading into the third quarter of 2020, a total of 64 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from one quarter earlier. On the other hand, there were a total of 42 hedge funds with a bullish position in DD a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, 40 North Management held the most valuable stake in DuPont de Nemours Inc (NYSE:DD), which was worth $1076.7 million at the end of the third quarter. On the second spot was D E Shaw which amassed $382.7 million worth of shares. Eminence Capital, Maverick Capital, and Citadel Investment Group 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 40 North Management allocated the biggest weight to DuPont de Nemours Inc (NYSE:DD), around 32.96% of its 13F portfolio. Madison Avenue Partners is also relatively very bullish on the stock, designating 18.39 percent of its 13F equity portfolio to DD.
Consequently, key hedge funds have jumped into DuPont de Nemours Inc (NYSE:DD) headfirst. Point State Capital, managed by Zach Schreiber, assembled the most valuable position in DuPont de Nemours Inc (NYSE:DD). Point State Capital had $89.5 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also initiated a $79.7 million position during the quarter. The following funds were also among the new DD investors: Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Alexander Mitchell’s Scopus Asset Management, and William B. Gray’s Orbis Investment Management.
Let’s now review hedge fund activity in other stocks similar to DuPont de Nemours Inc (NYSE:DD). We will take a look at The Kraft Heinz Company (NASDAQ:KHC), Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), DexCom, Inc. (NASDAQ:DXCM), Digital Realty Trust, Inc. (NYSE:DLR), Electronic Arts Inc. (NASDAQ:EA), BCE Inc. (NYSE:BCE), and General Mills, Inc. (NYSE:GIS). This group of stocks’ market caps match DD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KHC | 35 | 10727266 | -4 |
| SMFG | 10 | 101369 | 0 |
| DXCM | 55 | 1710751 | -3 |
| DLR | 26 | 274088 | -3 |
| EA | 67 | 1988616 | -6 |
| BCE | 10 | 176362 | -3 |
| GIS | 37 | 912759 | -2 |
| Average | 34.3 | 2270173 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.3 hedge funds with bullish positions and the average amount invested in these stocks was $2270 million. That figure was $3510 million in DD’s case. Electronic Arts Inc. (NASDAQ:EA) is the most popular stock in this table. On the other hand Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) is the least popular one with only 10 bullish hedge fund positions. DuPont de Nemours Inc (NYSE:DD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DD is 80.8. 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. This is a slightly positive signal but 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 28.2% in 2020 through August 24th but beat the market by 20.6 percentage points. Unfortunately DD wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on DD were disappointed as the stock returned 7.7% during the same time period 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 many of these stocks already outperformed the market so far this year.
Follow Dupont (Old Filings) (NYSE:DD)
Follow Dupont (Old Filings) (NYSE:DD)
Disclosure: None. This article was originally published at Insider Monkey.
