Is XRAY Stock A Buy or Sell?

In this article we are going to use hedge fund sentiment as a tool and determine whether DENTSPLY SIRONA Inc. (NASDAQ:XRAY) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is XRAY stock a buy? The best stock pickers were buying. The number of long hedge fund positions went up by 3 in recent months. DENTSPLY SIRONA Inc. (NASDAQ:XRAY) was in 28 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 33. Our calculations also showed that XRAY isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 25 hedge funds in our database with XRAY holdings at the end of September.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

David Blood of Generation Investment Management

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 view the fresh hedge fund action surrounding DENTSPLY SIRONA Inc. (NASDAQ:XRAY).

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

Heading into the first quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in XRAY over the last 22 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Generation Investment Management was the largest shareholder of DENTSPLY SIRONA Inc. (NASDAQ:XRAY), with a stake worth $983 million reported as of the end of December. Trailing Generation Investment Management was Melvin Capital Management, which amassed a stake valued at $115.2 million. Alyeska Investment Group, Renaissance Technologies, and Millennium Management 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 Generation Investment Management allocated the biggest weight to DENTSPLY SIRONA Inc. (NASDAQ:XRAY), around 4.39% of its 13F portfolio. Melvin Capital Management is also relatively very bullish on the stock, setting aside 0.51 percent of its 13F equity portfolio to XRAY.

There weren’t any hedge funds initiating brand new positions in the stock during the fourth quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as DENTSPLY SIRONA Inc. (NASDAQ:XRAY) but similarly valued. These stocks are Equitable Holdings, Inc. (NYSE:EQH), Appian Corporation (NASDAQ:APPN), UDR, Inc. (NYSE:UDR), Yatsen Holding Limited (NYSE:YSG), Whirlpool Corporation (NYSE:WHR), Kirkland Lake Gold Ltd. (NYSE:KL), and Vail Resorts, Inc. (NYSE:MTN). This group of stocks’ market caps are similar to XRAY’s market cap.

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As you can see these stocks had an average of 29.4 hedge funds with bullish positions and the average amount invested in these stocks was $816 million. That figure was $1224 million in XRAY’s case. Equitable Holdings, Inc. (NYSE:EQH) is the most popular stock in this table. On the other hand UDR, Inc. (NYSE:UDR) is the least popular one with only 23 bullish hedge fund positions. DENTSPLY SIRONA Inc. (NASDAQ:XRAY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for XRAY is 44.3. 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 gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. A small number of hedge funds were also right about betting on XRAY as the stock returned 25.4% since the end of the fourth quarter (through 4/19) and outperformed the market by an even larger margin.

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

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