Should I Buy Dell Technologies Inc. (DELL)?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Dell Technologies Inc. (NYSE:DELL).

Dell Technologies Inc. (NYSE:DELL) shareholders have witnessed an increase in activity from the world’s largest hedge funds of late. Dell Technologies Inc. (NYSE:DELL) was in 54 hedge funds’ portfolios at the end of March. The all time high for this statistic is 86. There were 50 hedge funds in our database with DELL holdings at the end of December. Our calculations also showed that DELL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Joshua Friedman of Canyon Capital Advisors

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. Keeping this in mind we’re going to review the latest hedge fund action encompassing Dell Technologies Inc. (NYSE:DELL).

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

Heading into the second quarter of 2021, a total of 54 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DELL over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Paul Singer’s Elliott Investment Management has the most valuable position in Dell Technologies Inc. (NYSE:DELL), worth close to $2.189 billion, corresponding to 16.3% of its total 13F portfolio. Sitting at the No. 2 spot is Lyrical Asset Management, managed by Andrew Wellington and Jeff Keswin, which holds a $444.6 million position; 5.2% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism include Joshua Friedman and Mitchell Julis’s Canyon Capital Advisors, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position HighVista Strategies allocated the biggest weight to Dell Technologies Inc. (NYSE:DELL), around 23.28% of its 13F portfolio. Engine Capital is also relatively very bullish on the stock, setting aside 18.59 percent of its 13F equity portfolio to DELL.

As one would reasonably expect, key money managers were breaking ground themselves. Third Point, managed by Dan Loeb, initiated the largest position in Dell Technologies Inc. (NYSE:DELL). Third Point had $176.3 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $57.9 million position during the quarter. The other funds with brand new DELL positions are Scott Ferguson’s Sachem Head Capital, Himanshu Gulati’s Antara Capital, and John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s now review hedge fund activity in other stocks similar to Dell Technologies Inc. (NYSE:DELL). These stocks are Brookfield Asset Management Inc. (NYSE:BAM), Westpac Banking Corporation (NYSE:WBK), Colgate-Palmolive Company (NYSE:CL), The Sherwin-Williams Company (NYSE:SHW), The Southern Company (NYSE:SO), Snowflake Inc (NYSE:SNOW), and HCA Healthcare Inc (NYSE:HCA). This group of stocks’ market caps match DELL’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 43.4 hedge funds with bullish positions and the average amount invested in these stocks was $3203 million. That figure was $4835 million in DELL’s case. Snowflake Inc (NYSE:SNOW) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 3 bullish hedge fund positions. Dell Technologies Inc. (NYSE:DELL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DELL is 65.3. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Hedge funds were also right about betting on DELL as the stock returned 18% since the end of Q1 (through 6/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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