While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding DaVita Inc (NYSE:DVA).
Is DVA a good stock to buy? DaVita Inc (NYSE:DVA) has experienced an increase in hedge fund sentiment in recent months. DaVita Inc (NYSE:DVA) was in 34 hedge funds’ portfolios at the end of March. The all time high for this statistic is 43. Our calculations also showed that DVA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
To most stock holders, hedge funds are perceived as slow, outdated financial vehicles of yesteryear. While there are more than 8000 funds with their doors open at the moment, Our experts choose to focus on the bigwigs of this group, approximately 850 funds. These hedge fund managers command bulk of the smart money’s total capital, and by tracking their finest picks, Insider Monkey has formulated numerous investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Jeffrey Gates of Gates Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. Keeping this in mind let’s take a look at the key hedge fund action surrounding DaVita Inc (NYSE:DVA).
Do Hedge Funds Think DVA Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DVA over the last 23 quarters. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, Berkshire Hathaway was the largest shareholder of DaVita Inc (NYSE:DVA), with a stake worth $3890 million reported as of the end of March. Trailing Berkshire Hathaway was Gates Capital Management, which amassed a stake valued at $151.2 million. DPM Capital, Citadel Investment Group, and Glenview Capital 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 DPM Capital allocated the biggest weight to DaVita Inc (NYSE:DVA), around 95.44% of its 13F portfolio. Gates Capital Management is also relatively very bullish on the stock, designating 5.5 percent of its 13F equity portfolio to DVA.
As industrywide interest jumped, key money managers have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, assembled the most valuable position in DaVita Inc (NYSE:DVA). Citadel Investment Group had $48.8 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser’s Magnetar Capital also initiated a $10.9 million position during the quarter. The following funds were also among the new DVA investors: Brandon Haley’s Holocene Advisors, Vishal Saluja and Pham Quang’s Endurant Capital Management, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.
Let’s check out hedge fund activity in other stocks similar to DaVita Inc (NYSE:DVA). We will take a look at Autohome Inc (NYSE:ATHM), Lennox International Inc. (NYSE:LII), Vail Resorts, Inc. (NYSE:MTN), China Eastern Airlines Corp. Ltd. (NYSE:CEA), FactSet Research Systems Inc. (NYSE:FDS), Brookfield Renewable Partners L.P. (NYSE:BEP), and Vedanta Ltd (NYSE:VEDL). This group of stocks’ market values are closest to DVA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ATHM | 18 | 588993 | 2 |
| LII | 25 | 395757 | -2 |
| MTN | 36 | 1091529 | 5 |
| CEA | 3 | 2009 | 2 |
| FDS | 30 | 355190 | 0 |
| BEP | 24 | 223248 | 4 |
| VEDL | 10 | 85028 | 0 |
| Average | 20.9 | 391679 | 1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $392 million. That figure was $4399 million in DVA’s case. Vail Resorts, Inc. (NYSE:MTN) is the most popular stock in this table. On the other hand China Eastern Airlines Corp. Ltd. (NYSE:CEA) is the least popular one with only 3 bullish hedge fund positions. DaVita Inc (NYSE:DVA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DVA is 77.7. 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 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Hedge funds were also right about betting on DVA, though not to the same extent, as the stock returned 12.9% since Q1 (through June 25th) and outperformed the market as well.
Follow Davita Inc. (NYSE:DVA)
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Disclosure: None. This article was originally published at Insider Monkey.
