“The end to the U.S. Government shutdown, reports of progress on China-U.S. trade talks, and the Federal Reserve’s confirmation that it did not plan further interest rate hikes in 2019 allayed investor fears and drove U.S. markets substantially higher in the first quarter of the year. Global markets followed suit pretty much across the board delivering what some market participants described as a “V-shaped” recovery,” This is how Evermore Global Value summarized the first quarter in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.
Dollar Tree, Inc. (NASDAQ:DLTR) was in 48 hedge funds’ portfolios at the end of March. DLTR has experienced a decrease in support from the world’s most elite money managers of late. There were 53 hedge funds in our database with DLTR holdings at the end of the previous quarter. Our calculations also showed that dltr isn’t among the 30 most popular stocks among hedge funds.
In the eyes of most market participants, hedge funds are perceived as unimportant, outdated financial tools of years past. While there are greater than 8000 funds with their doors open today, Our researchers look at the upper echelon of this group, approximately 750 funds. It is estimated that this group of investors command bulk of the hedge fund industry’s total asset base, and by following their first-class stock picks, Insider Monkey has deciphered a number of investment strategies that have historically outstripped the broader indices. Insider Monkey’s flagship hedge fund strategy beat the S&P 500 index by around 5 percentage points a year since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
Let’s take a gander at the recent hedge fund action surrounding Dollar Tree, Inc. (NASDAQ:DLTR).
Hedge fund activity in Dollar Tree, Inc. (NASDAQ:DLTR)
At the end of the first quarter, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DLTR over the last 15 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Akre Capital Management was the largest shareholder of Dollar Tree, Inc. (NASDAQ:DLTR), with a stake worth $534.3 million reported as of the end of March. Trailing Akre Capital Management was Two Sigma Advisors, which amassed a stake valued at $269.9 million. D E Shaw, Citadel Investment Group, and Rivulet Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Since Dollar Tree, Inc. (NASDAQ:DLTR) has experienced bearish sentiment from the smart money, it’s safe to say that there is a sect of hedgies who were dropping their positions entirely by the end of the third quarter. At the top of the heap, Brandon Haley’s Holocene Advisors cut the largest position of the “upper crust” of funds followed by Insider Monkey, totaling close to $112.5 million in stock. Michael Pausic’s fund, Foxhaven Asset Management, also sold off its stock, about $60.8 million worth. These moves are interesting, as total hedge fund interest dropped by 5 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to Dollar Tree, Inc. (NASDAQ:DLTR). These stocks are Brown-Forman Corporation (NYSE:BF), WEC Energy Group, Inc. (NYSE:WEC), State Street Corporation (NYSE:STT), and Fresenius Medical Care AG & Co. KGaA (NYSE:FMS). This group of stocks’ market values match DLTR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BF | 24 | 646634 | 3 |
| WEC | 15 | 437674 | 2 |
| STT | 32 | 719914 | 0 |
| FMS | 7 | 17048 | -1 |
| Average | 19.5 | 455318 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $455 million. That figure was $2547 million in DLTR’s case. State Street Corporation (NYSE:STT) is the most popular stock in this table. On the other hand Fresenius Medical Care AG & Co. KGaA (NYSE:FMS) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Dollar Tree, Inc. (NASDAQ:DLTR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately DLTR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on DLTR were disappointed as the stock returned -6.4% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
