The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May and August as this time China pivoted and Trump put more pressure on China by increasing tariffs. Fourth quarter brought optimism to the markets and hedge funds’ top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 34.7% through November 22nd, vs. a gain of 26.2% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards Dell Technologies Inc. (NYSE:DELL), and what that likely means for the prospects of the company and its stock.
Is Dell Technologies Inc. (NYSE:DELL) a buy here? Investors who are in the know are in a bullish mood. The number of bullish hedge fund positions improved by 5 lately. Our calculations also showed that DELL isn’t among the 30 most popular stocks among hedge funds.
In the eyes of most investors, hedge funds are perceived as unimportant, outdated financial vehicles of years past. While there are more than 8000 funds with their doors open at the moment, Our researchers choose to focus on the upper echelon of this group, about 750 funds. These hedge fund managers administer most of all hedge funds’ total capital, and by keeping an eye on their first-class stock picks, Insider Monkey has uncovered a few investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Paul Singer of Elliott Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the new hedge fund action encompassing Dell Technologies Inc. (NYSE:DELL).
Hedge fund activity in Dell Technologies Inc. (NYSE:DELL)
At the end of the third quarter, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the second quarter of 2019. By comparison, 61 hedge funds held shares or bullish call options in DELL a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Dell Technologies Inc. (NYSE:DELL) was held by Elliott Management, which reported holding $674.2 million worth of stock at the end of September. It was followed by Canyon Capital Advisors with a $263.5 million position. Other investors bullish on the company included MSD Capital, First Pacific Advisors, and Lakewood Capital Management. In terms of the portfolio weights assigned to each position MSD Capital allocated the biggest weight to Dell Technologies Inc. (NYSE:DELL), around 76.32% of its portfolio. HighVista Strategies is also relatively very bullish on the stock, dishing out 24.09 percent of its 13F equity portfolio to DELL.
As aggregate interest increased, key hedge funds were leading the bulls’ herd. First Pacific Advisors, managed by Robert Rodriguez and Steven Romick, initiated the largest position in Dell Technologies Inc. (NYSE:DELL). First Pacific Advisors had $147 million invested in the company at the end of the quarter. David Rosen’s Rubric Capital Management also initiated a $36.3 million position during the quarter. The other funds with brand new DELL positions are Mike Masters’s Masters Capital Management, Brett Hendrickson’s Nokomis Capital, and Paul Marshall and Ian Wace’s Marshall Wace.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Dell Technologies Inc. (NYSE:DELL) but similarly valued. These stocks are Pinduoduo Inc. (NASDAQ:PDD), Delta Air Lines, Inc. (NYSE:DAL), Roper Technologies, Inc. (NYSE:ROP), and China Telecom Corporation Limited (NYSE:CHA). This group of stocks’ market valuations match DELL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PDD | 30 | 1435122 | 1 |
| DAL | 65 | 6996617 | -5 |
| ROP | 37 | 1044629 | 2 |
| CHA | 8 | 24410 | 1 |
| Average | 35 | 2375195 | -0.25 |
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 $2375 million. That figure was $2444 million in DELL’s case. Delta Air Lines, Inc. (NYSE:DAL) is the most popular stock in this table. On the other hand China Telecom Corporation Limited (NYSE:CHA) is the least popular one with only 8 bullish hedge fund positions. Dell Technologies Inc. (NYSE:DELL) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately DELL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on DELL were disappointed as the stock returned 3.4% during the fourth quarter (through 11/22) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
