In this article you are going to find out whether hedge funds think DXC Technology Company (NYSE:DXC) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is DXC stock a buy or sell? DXC Technology Company (NYSE:DXC) investors should pay attention to an increase in hedge fund interest recently. DXC Technology Company (NYSE:DXC) was in 39 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 60. Our calculations also showed that DXC 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.
Larry Robbins of Glenview Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy 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. Keeping this in mind we’re going to review the recent hedge fund action regarding DXC Technology Company (NYSE:DXC).
Do Hedge Funds Think DXC Is A Good Stock To Buy Now?
At fourth quarter’s end, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the previous quarter. By comparison, 47 hedge funds held shares or bullish call options in DXC a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Glenview Capital, managed by Larry Robbins, holds the largest position in DXC Technology Company (NYSE:DXC). Glenview Capital has a $261.3 million position in the stock, comprising 6% of its 13F portfolio. Coming in second is Miller Value Partners, managed by Bill Miller, which holds a $137.9 million position; 4.2% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Steve Cohen’s Point72 Asset Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Glenview Capital allocated the biggest weight to DXC Technology Company (NYSE:DXC), around 5.99% of its 13F portfolio. Miller Value Partners is also relatively very bullish on the stock, designating 4.2 percent of its 13F equity portfolio to DXC.
As aggregate interest increased, key hedge funds have been driving this bullishness. Samlyn Capital, managed by Robert Pohly, created the biggest position in DXC Technology Company (NYSE:DXC). Samlyn Capital had $13.9 million invested in the company at the end of the quarter. Nicholas Bagnall’s Te Ahumairangi Investment Management also initiated a $7.2 million position during the quarter. The other funds with new positions in the stock are Dan Rasmussen’s Verdad Advisers, Kevin McCarthy’s Breakline Capital, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as DXC Technology Company (NYSE:DXC) but similarly valued. We will take a look at Hill-Rom Holdings, Inc. (NYSE:HRC), Kimco Realty Corp (NYSE:KIM), Cabot Oil & Gas Corporation (NYSE:COG), ADT Inc. (NYSE:ADT), JOYY Inc. (NASDAQ:YY), OneMain Holdings Inc (NYSE:OMF), and ICL Group Ltd. (NYSE:ICL). All of these stocks’ market caps resemble DXC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HRC | 28 | 414534 | -6 |
| KIM | 22 | 216436 | 0 |
| COG | 19 | 94339 | -6 |
| ADT | 24 | 281328 | -6 |
| YY | 20 | 205802 | -11 |
| OMF | 30 | 654934 | -3 |
| ICL | 5 | 27624 | 0 |
| Average | 21.1 | 270714 | -4.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $271 million. That figure was $787 million in DXC’s case. OneMain Holdings Inc (NYSE:OMF) is the most popular stock in this table. On the other hand ICL Group Ltd. (NYSE:ICL) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks DXC Technology Company (NYSE:DXC) is more popular among hedge funds. Our overall hedge fund sentiment score for DXC is 76.5. 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 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 returned 5.3% in 2021 through March 19th but still managed to beat the market by 0.8 percentage points. Hedge funds were also right about betting on DXC as the stock returned 8.9% since the end of December (through 3/19) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
