Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Dollar Tree, Inc. (NASDAQ:DLTR) in this article.
Is DLTR stock a buy or sell? Money managers were in a bullish mood. The number of long hedge fund positions increased by 3 in recent months. Dollar Tree, Inc. (NASDAQ:DLTR) was in 53 hedge funds’ portfolios at the end of December. The all time high for this statistic is 65. Our calculations also showed that DLTR 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). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Glenn Greenberg of Brave Warrior Capital
At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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 (or at the end of this article). With all of this in mind we’re going to go over the fresh hedge fund action surrounding Dollar Tree, Inc. (NASDAQ:DLTR).
Do Hedge Funds Think DLTR Is A Good Stock To Buy Now?
At the end of December, a total of 53 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the third quarter of 2020. On the other hand, there were a total of 51 hedge funds with a bullish position in DLTR a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Akre Capital Management was the largest shareholder of Dollar Tree, Inc. (NASDAQ:DLTR), with a stake worth $489 million reported as of the end of December. Trailing Akre Capital Management was Rivulet Capital, which amassed a stake valued at $255.1 million. Kensico Capital, Adage Capital Management, and Brave Warrior 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 Rivulet Capital allocated the biggest weight to Dollar Tree, Inc. (NASDAQ:DLTR), around 12.63% of its 13F portfolio. KG Funds Management is also relatively very bullish on the stock, dishing out 6.34 percent of its 13F equity portfolio to DLTR.
As aggregate interest increased, specific money managers have been driving this bullishness. Dorsal Capital Management, managed by Ryan Frick and Oliver Evans, created the most outsized position in Dollar Tree, Inc. (NASDAQ:DLTR). Dorsal Capital Management had $75.6 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also made a $43 million investment in the stock during the quarter. The other funds with brand new DLTR positions are Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Zach Schreiber’s Point State Capital, and Kamyar Khajavi’s MIK Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Dollar Tree, Inc. (NASDAQ:DLTR). We will take a look at Skyworks Solutions Inc (NASDAQ:SWKS), First Republic Bank (NYSE:FRC), Hormel Foods Corporation (NYSE:HRL), D.R. Horton, Inc. (NYSE:DHI), Weyerhaeuser Co. (NYSE:WY), ZTO Express (Cayman) Inc. (NYSE:ZTO), and PG&E Corporation (NYSE:PCG). This group of stocks’ market valuations resemble DLTR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SWKS | 41 | 763595 | -9 |
| FRC | 34 | 1270095 | 3 |
| HRL | 31 | 523117 | 1 |
| DHI | 64 | 1922728 | 2 |
| WY | 40 | 614210 | -1 |
| ZTO | 17 | 426129 | -5 |
| PCG | 66 | 6651557 | -10 |
| Average | 41.9 | 1738776 | -2.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 41.9 hedge funds with bullish positions and the average amount invested in these stocks was $1739 million. That figure was $1977 million in DLTR’s case. PG&E Corporation (NYSE:PCG) is the most popular stock in this table. On the other hand ZTO Express (Cayman) Inc. (NYSE:ZTO) is the least popular one with only 17 bullish hedge fund positions. Dollar Tree, Inc. (NASDAQ:DLTR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DLTR is 69.2. 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 positive signal but 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 5.3% in 2021 through March 19th and beat the market again by 0.8 percentage points. Unfortunately DLTR wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on DLTR were disappointed as the stock returned 0.1% since the end of December (through 3/19) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
