Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of DuPont de Nemours Inc (NYSE:DD).
DuPont de Nemours Inc (NYSE:DD) was in 54 hedge funds’ portfolios at the end of March. DD has experienced a decrease in activity from the world’s largest hedge funds of late. There were 68 hedge funds in our database with DD positions at the end of the previous quarter. Our calculations also showed that DD 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.
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. 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 44 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.
Lee Ainslie of Maverick Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“. We interview hedge fund managers and ask them about best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to go over the recent hedge fund action surrounding DuPont de Nemours Inc (NYSE:DD).
What have hedge funds been doing with DuPont de Nemours Inc (NYSE:DD)?
Heading into the second quarter of 2020, a total of 54 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 DD over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, 40 North Management held the most valuable stake in DuPont de Nemours Inc (NYSE:DD), which was worth $676.2 million at the end of the third quarter. On the second spot was Maverick Capital which amassed $346.6 million worth of shares. D E Shaw, Southeastern Asset Management, and First Pacific Advisors LLC 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 41.16% of its 13F portfolio. Madison Avenue Partners is also relatively very bullish on the stock, dishing out 14.84 percent of its 13F equity portfolio to DD.
Due to the fact that DuPont de Nemours Inc (NYSE:DD) has faced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few fund managers that slashed their entire stakes by the end of the third quarter. Interestingly, Aaron Cowen’s Suvretta Capital Management dumped the largest investment of the 750 funds watched by Insider Monkey, totaling close to $68.7 million in stock, and Leon Cooperman’s Omega Advisors was right behind this move, as the fund said goodbye to about $50.9 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 14 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to DuPont de Nemours Inc (NYSE:DD). These stocks are Hormel Foods Corporation (NYSE:HRL), HP Inc. (NYSE:HPQ), Alcon Inc. (NYSE:ALC), and AFLAC Incorporated (NYSE:AFL). 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 |
|---|---|---|---|
| HRL | 28 | 276267 | 5 |
| HPQ | 43 | 2180945 | -6 |
| ALC | 25 | 605394 | 1 |
| AFL | 32 | 387153 | 0 |
| Average | 32 | 862440 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $862 million. That figure was $2412 million in DD’s case. HP Inc. (NYSE:HPQ) is the most popular stock in this table. On the other hand Alcon Inc. (NYSE:ALC) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks DuPont de Nemours Inc (NYSE:DD) is more popular among hedge funds. 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 returned 7.9% in 2020 through May 22nd but still managed to beat the market by 15.6 percentage points. Hedge funds were also right about betting on DD as the stock returned 42.8% so far in Q2 (through May 22nd) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
