Were Hedge Funds Right About Loading Up On Dover Corporation (DOV)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Dover Corporation (NYSE:DOV).

Is Dover Corporation (NYSE:DOV) a healthy stock for your portfolio? Investors who are in the know were in a bullish mood. The number of bullish hedge fund bets moved up by 9 in recent months. Dover Corporation (NYSE:DOV) was in 40 hedge funds’ portfolios at the end of June. The all time high for this statistics is 35. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that DOV isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 31 hedge funds in our database with DOV holdings at the end of March.

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most investors, hedge funds are viewed as slow, outdated financial tools of years past. While there are more than 8000 funds trading at the moment, Our researchers choose to focus on the moguls of this group, about 850 funds. These investment experts handle the majority of all hedge funds’ total asset base, and by keeping track of their matchless investments, Insider Monkey has uncovered many investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Charles Davidson of Wexford Capital

At Insider Monkey we scour multiple sources to uncover 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 most profitable companies in the world to pick the best large-cap stocks to buy. 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 to get excerpts of these letters in your inbox. With all of this in mind we’re going to take a gander at the fresh hedge fund action surrounding Dover Corporation (NYSE:DOV).

Hedge fund activity in Dover Corporation (NYSE:DOV)

Heading into the third quarter of 2020, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from the first quarter of 2020. By comparison, 32 hedge funds held shares or bullish call options in DOV a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Among these funds, Citadel Investment Group held the most valuable stake in Dover Corporation (NYSE:DOV), which was worth $285.8 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $65.6 million worth of shares. D E Shaw, Scopus Asset Management, 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 Wexford Capital allocated the biggest weight to Dover Corporation (NYSE:DOV), around 1.4% of its 13F portfolio. Arosa Capital Management is also relatively very bullish on the stock, designating 1.26 percent of its 13F equity portfolio to DOV.

As one would reasonably expect, some big names have jumped into Dover Corporation (NYSE:DOV) headfirst. Alyeska Investment Group, managed by Anand Parekh, established the biggest position in Dover Corporation (NYSE:DOV). Alyeska Investment Group had $13.1 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $10.7 million investment in the stock during the quarter. The other funds with brand new DOV positions are Charles Davidson and Joseph Jacobs’s Wexford Capital, Doron Breen and Mori Arkin’s Sphera Global Healthcare Fund, and Michael Gelband’s ExodusPoint Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Dover Corporation (NYSE:DOV) but similarly valued. We will take a look at Rollins, Inc. (NYSE:ROL), International Paper Company (NYSE:IP), The Hartford Financial Services Group Inc (NYSE:HIG), Tyler Technologies, Inc. (NYSE:TYL), ONEOK, Inc. (NYSE:OKE), Pembina Pipeline Corp (NYSE:PBA), and Fifth Third Bancorp (NASDAQ:FITB). This group of stocks’ market caps are closest to DOV’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.6 hedge funds with bullish positions and the average amount invested in these stocks was $404 million. That figure was $684 million in DOV’s case. The Hartford Financial Services Group Inc (NYSE:HIG) is the most popular stock in this table. On the other hand Pembina Pipeline Corp (NYSE:PBA) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Dover Corporation (NYSE:DOV) is more popular among hedge funds. Our overall hedge fund sentiment score for DOV is 90. 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 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 returned 23% in 2020 through October 30th but still managed to beat the market by 20.1 percentage points. Hedge funds were also right about betting on DOV as the stock returned 15.2% since the end of June (through 10/30) 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.

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