Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Delphi Technologies PLC (NYSE:DLPH) is a good investment right now.
Is Delphi Technologies PLC (NYSE:DLPH) a buy, sell, or hold? Money managers are in a bearish mood. The number of long hedge fund positions were trimmed by 4 recently. Our calculations also showed that DLPH isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Paul Tudor Jones of Tudor Investment Corp
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a gander at the key hedge fund action regarding Delphi Technologies PLC (NYSE:DLPH).
Hedge fund activity in Delphi Technologies PLC (NYSE:DLPH)
Heading into the first quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards DLPH over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in Delphi Technologies PLC (NYSE:DLPH), which was worth $37.1 million at the end of the third quarter. On the second spot was D E Shaw which amassed $34.5 million worth of shares. Impax Asset Management, Citadel Investment Group, and Masters Capital 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 Masters Capital Management allocated the biggest weight to Delphi Technologies PLC (NYSE:DLPH), around 0.7% of its 13F portfolio. Masters Capital Management is also relatively very bullish on the stock, dishing out 0.56 percent of its 13F equity portfolio to DLPH.
Because Delphi Technologies PLC (NYSE:DLPH) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of money managers who were dropping their positions entirely by the end of the third quarter. Intriguingly, Larry Robbins’s Glenview Capital said goodbye to the biggest investment of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $20.3 million in stock, and Christopher James’s Partner Fund Management was right behind this move, as the fund said goodbye to about $5.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Delphi Technologies PLC (NYSE:DLPH) but similarly valued. These stocks are Callon Petroleum Company (NYSE:CPE), Wesco Aircraft Holdings Inc (NYSE:WAIR), Stratasys, Ltd. (NASDAQ:SSYS), and Encore Capital Group, Inc. (NASDAQ:ECPG). This group of stocks’ market caps are similar to DLPH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CPE | 27 | 226348 | -2 |
| WAIR | 18 | 166223 | -7 |
| SSYS | 18 | 81813 | 4 |
| ECPG | 13 | 72952 | 1 |
| Average | 19 | 136834 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $137 million. That figure was $156 million in DLPH’s case. Callon Petroleum Company (NYSE:CPE) is the most popular stock in this table. On the other hand Encore Capital Group, Inc. (NASDAQ:ECPG) is the least popular one with only 13 bullish hedge fund positions. Delphi Technologies PLC (NYSE:DLPH) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately DLPH wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); DLPH investors were disappointed as the stock returned -25.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
