Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Is DENTSPLY SIRONA Inc. (NASDAQ:XRAY) a buy here? Money managers are taking an optimistic view. The number of bullish hedge fund positions moved up by 5 recently. Our calculations also showed that XRAY isn’t among the 30 most popular stocks among hedge funds. XRAY was in 28 hedge funds’ portfolios at the end of the third quarter of 2018. There were 23 hedge funds in our database with XRAY holdings at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a peek at the latest hedge fund action encompassing DENTSPLY SIRONA Inc. (NASDAQ:XRAY).
Hedge fund activity in DENTSPLY SIRONA Inc. (NASDAQ:XRAY)
Heading into the fourth quarter of 2018, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards XRAY over the last 13 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, Generation Investment Management was the largest shareholder of DENTSPLY SIRONA Inc. (NASDAQ:XRAY), with a stake worth $814.4 million reported as of the end of September. Trailing Generation Investment Management was D E Shaw, which amassed a stake valued at $93.4 million. ValueAct Capital, OrbiMed Advisors, and Select Equity Group were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, specific money managers were leading the bulls’ herd. ValueAct Capital, managed by Jeffrey Ubben, assembled the most valuable position in DENTSPLY SIRONA Inc. (NASDAQ:XRAY). ValueAct Capital had $83 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also made a $9.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Alec Litowitz and Ross Laser’s Magnetar Capital, and John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s check out hedge fund activity in other stocks similar to DENTSPLY SIRONA Inc. (NASDAQ:XRAY). These stocks are ICON Public Limited Company (NASDAQ:ICLR), L Brands Inc (NYSE:LB), Brown & Brown, Inc. (NYSE:BRO), and DocuSign, Inc. (NASDAQ:DOCU). This group of stocks’ market caps are similar to XRAY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ICLR | 22 | 577377 | 7 |
| LB | 27 | 685137 | 2 |
| BRO | 22 | 715848 | 0 |
| DOCU | 37 | 582881 | 17 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $640 million. That figure was $1.25 billion in XRAY’s case. DocuSign, Inc. (NASDAQ:DOCU) is the most popular stock in this table. On the other hand ICON Public Limited Company (NASDAQ:ICLR) is the least popular one with only 22 bullish hedge fund positions. DENTSPLY SIRONA Inc. (NASDAQ:XRAY) 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. In this regard DOCU might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
