Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Dynatrace, Inc. (NYSE:DT) changed recently.
Dynatrace, Inc. (NYSE:DT) was in 41 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 53. DT has seen a decrease in hedge fund sentiment in recent months. There were 50 hedge funds in our database with DT holdings at the end of June. Our calculations also showed that DT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Dmitry Balyasny of Balyasny Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Now we’re going to review the key hedge fund action encompassing Dynatrace, Inc. (NYSE:DT).
Do Hedge Funds Think DT Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DT over the last 25 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, HMI Capital was the largest shareholder of Dynatrace, Inc. (NYSE:DT), with a stake worth $357.1 million reported as of the end of September. Trailing HMI Capital was SRS Investment Management, which amassed a stake valued at $307.1 million. Melvin Capital Management, Alkeon Capital Management, and Matrix Capital Management 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 Cota Capital allocated the biggest weight to Dynatrace, Inc. (NYSE:DT), around 11.74% of its 13F portfolio. HMI Capital is also relatively very bullish on the stock, designating 10.71 percent of its 13F equity portfolio to DT.
Because Dynatrace, Inc. (NYSE:DT) has faced falling interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of funds that decided to sell off their entire stakes by the end of the third quarter. It’s worth mentioning that Glen Kacher’s Light Street Capital dropped the largest investment of the 750 funds tracked by Insider Monkey, comprising close to $42.7 million in stock, and John Hurley’s Cavalry Asset Management was right behind this move, as the fund dropped about $20.9 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 9 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to Dynatrace, Inc. (NYSE:DT). These stocks are NetApp Inc. (NASDAQ:NTAP), Teledyne Technologies Incorporated (NYSE:TDY), Citizens Financial Group Inc (NYSE:CFG), Entergy Corporation (NYSE:ETR), RingCentral Inc (NYSE:RNG), Darden Restaurants, Inc. (NYSE:DRI), and ON Semiconductor Corporation (NASDAQ:ON). This group of stocks’ market values are similar to DT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NTAP | 29 | 671456 | -2 |
| TDY | 38 | 1703394 | 2 |
| CFG | 34 | 361791 | -2 |
| ETR | 30 | 283209 | -1 |
| RNG | 48 | 2905250 | 1 |
| DRI | 25 | 337086 | -19 |
| ON | 41 | 1251738 | -3 |
| Average | 35 | 1073418 | -3.4 |
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 $1073 million. That figure was $2389 million in DT’s case. RingCentral Inc (NYSE:RNG) is the most popular stock in this table. On the other hand Darden Restaurants, Inc. (NYSE:DRI) is the least popular one with only 25 bullish hedge fund positions. Dynatrace, Inc. (NYSE:DT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DT is 54. 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 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately DT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on DT were disappointed as the stock returned -11.4% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Dynatrace Inc. (NYSE:DT)
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Disclosure: None. This article was originally published at Insider Monkey.
