Hedge Funds Are Dumping Dover Corporation (DOV)

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 Dover Corporation (NYSE:DOV).

Dover Corporation (NYSE:DOV) investors should be aware of a decrease in activity from the world’s largest hedge funds in recent months. Dover Corporation (NYSE:DOV) was in 26 hedge funds’ portfolios at the end of March. The all time high for this statistic is 40. There were 32 hedge funds in our database with DOV positions at the end of the fourth quarter. Our calculations also showed that DOV isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Sander Gerber of Hudson Bay Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. 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. Now we’re going to review the key hedge fund action regarding Dover Corporation (NYSE:DOV).

Do Hedge Funds Think DOV Is A Good Stock To Buy Now?

At first quarter’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in DOV over the last 23 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

More specifically, Citadel Investment Group was the largest shareholder of Dover Corporation (NYSE:DOV), with a stake worth $160.7 million reported as of the end of March. Trailing Citadel Investment Group was Adage Capital Management, which amassed a stake valued at $92 million. D E Shaw, AQR Capital Management, and East Side Capital (RR Partners) 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 East Side Capital (RR Partners) allocated the biggest weight to Dover Corporation (NYSE:DOV), around 5.79% of its 13F portfolio. Interval Partners is also relatively very bullish on the stock, earmarking 0.61 percent of its 13F equity portfolio to DOV.

Because Dover Corporation (NYSE:DOV) has witnessed bearish sentiment from hedge fund managers, logic holds that there exists a select few hedgies who sold off their full holdings by the end of the first quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management sold off the largest investment of all the hedgies tracked by Insider Monkey, comprising close to $14.9 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dumped about $3.2 million worth. These moves are interesting, as total hedge fund interest was cut by 6 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks similar to Dover Corporation (NYSE:DOV). These stocks are 10x Genomics, Inc. (NASDAQ:TXG), Discovery Inc. (NASDAQ:DISCA), Trimble Inc. (NASDAQ:TRMB), M&T Bank Corporation (NYSE:MTB), Teleflex Incorporated (NYSE:TFX), KB Financial Group, Inc. (NYSE:KB), and IAC/InterActiveCorp (NASDAQ:IAC). This group of stocks’ market values match DOV’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.6 hedge funds with bullish positions and the average amount invested in these stocks was $959 million. That figure was $640 million in DOV’s case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand KB Financial Group, Inc. (NYSE:KB) is the least popular one with only 9 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. Our overall hedge fund sentiment score for DOV is 34.2. 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 24% in 2021 through July 9th and beat the market by 6.7 percentage points. A small number of hedge funds were also right about betting on DOV, though not to the same extent, as the stock returned 12.3% since the end of Q1 (through July 9th) and outperformed the market.

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