Is DLR Stock A Buy or Sell?

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Digital Realty Trust, Inc. (NYSE:DLR).

Is DLR stock a buy? Digital Realty Trust, Inc. (NYSE:DLR) was in 23 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 34. DLR shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. There were 25 hedge funds in our database with DLR holdings at the end of September. Our calculations also showed that DLR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

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At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. With all of this in mind we’re going to take a glance at the key hedge fund action encompassing Digital Realty Trust, Inc. (NYSE:DLR).

Do Hedge Funds Think DLR Is A Good Stock To Buy Now?

At Q4’s end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. By comparison, 26 hedge funds held shares or bullish call options in DLR a year ago. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

More specifically, Jasper Ridge Partners was the largest shareholder of Digital Realty Trust, Inc. (NYSE:DLR), with a stake worth $91 million reported as of the end of December. Trailing Jasper Ridge Partners was Zimmer Partners, which amassed a stake valued at $83.7 million. Adage Capital Management, AQR Capital Management, and Waterfront Capital Partners 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 Jasper Ridge Partners allocated the biggest weight to Digital Realty Trust, Inc. (NYSE:DLR), around 3.89% of its 13F portfolio. Waterfront Capital Partners is also relatively very bullish on the stock, setting aside 1.86 percent of its 13F equity portfolio to DLR.

Seeing as Digital Realty Trust, Inc. (NYSE:DLR) has faced bearish sentiment from hedge fund managers, we can see that there lies a certain “tier” of funds that elected to cut their positions entirely last quarter. Intriguingly, Benjamin A. Smith’s Laurion Capital Management dumped the largest investment of the “upper crust” of funds watched by Insider Monkey, valued at an estimated $2.6 million in stock, and Ira Unschuld’s Brant Point Investment Management was right behind this move, as the fund said goodbye to about $2.3 million worth. These moves are important to note, as aggregate hedge fund interest fell by 2 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Digital Realty Trust, Inc. (NYSE:DLR) but similarly valued. We will take a look at Chipotle Mexican Grill, Inc. (NYSE:CMG), BCE Inc. (NYSE:BCE), TC Energy Corporation (NYSE:TRP), Canadian Imperial Bank of Commerce (NYSE:CM), Cadence Design Systems Inc (NASDAQ:CDNS), Liberty Broadband Corp (NASDAQ:LBRDK), and IHS Markit Ltd. (NYSE:INFO). This group of stocks’ market valuations resemble DLR’s market valuation.

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As you can see these stocks had an average of 35.9 hedge funds with bullish positions and the average amount invested in these stocks was $2156 million. That figure was $317 million in DLR’s case. Liberty Broadband Corp (NASDAQ:LBRDK) is the most popular stock in this table. On the other hand BCE Inc. (NYSE:BCE) is the least popular one with only 13 bullish hedge fund positions. Digital Realty Trust, Inc. (NYSE:DLR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DLR is 30.8. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately DLR wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); DLR investors were disappointed as the stock returned 6.8% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

Disclosure: None. This article was originally published at Insider Monkey.