Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about DaVita Inc (NYSE:DVA).
Is DVA a good stock to buy now? Prominent investors were in a pessimistic mood. The number of bullish hedge fund bets dropped by 1 lately. DaVita Inc (NYSE:DVA) was in 34 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 43. Our calculations also showed that DVA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 35 hedge funds in our database with DVA holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are a large number of methods market participants put to use to evaluate publicly traded companies. A duo of the most underrated methods are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the elite money managers can outperform the broader indices by a superb amount (see the details here).
Warren Buffett of Berkshire Hathaway
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 15 best blue chip stocks to buy 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. With all of this in mind we're going to take a glance at the latest hedge fund action encompassing DaVita Inc (NYSE:DVA).
Do Hedge Funds Think DVA Is A Good Stock To Buy Now?
At Q3's end, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in DVA over the last 21 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Is DVA A Good Stock To Buy?
The largest stake in DaVita Inc (NYSE:DVA) was held by Berkshire Hathaway, which reported holding $3091.6 million worth of stock at the end of September. It was followed by Gates Capital Management with a $116.4 million position. Other investors bullish on the company included DPM Capital, PAR Capital Management, and Iron Triangle Partners. In terms of the portfolio weights assigned to each position DPM Capital allocated the biggest weight to DaVita Inc (NYSE:DVA), around 68.92% of its 13F portfolio. Gates Capital Management is also relatively very bullish on the stock, setting aside 5.07 percent of its 13F equity portfolio to DVA.
Due to the fact that DaVita Inc (NYSE:DVA) has experienced bearish sentiment from the entirety of the hedge funds we track, we can see that there exists a select few fund managers that decided to sell off their positions entirely by the end of the third quarter. At the top of the heap, Brian Ashford-Russell and Tim Woolley's Polar Capital dumped the biggest investment of the "upper crust" of funds tracked by Insider Monkey, comprising an estimated $45.1 million in stock, and John Overdeck and David Siegel's Two Sigma Advisors was right behind this move, as the fund said goodbye to about $15.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 1 funds by the end of the third quarter.
Let's check out hedge fund activity in other stocks similar to DaVita Inc (NYSE:DVA). These stocks are Lennox International Inc. (NYSE:LII), Enphase Energy Inc (NASDAQ:ENPH), Beyond Meat, Inc. (NASDAQ:BYND), Crown Holdings, Inc. (NYSE:CCK), Packaging Corporation Of America (NYSE:PKG), Apollo Global Management Inc (NYSE:APO), and Graco Inc. (NYSE:GGG). This group of stocks' market valuations are similar to DVA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LII,34,333588,10 ENPH,42,1045304,2 BYND,24,393648,-5 CCK,47,1487437,-4 PKG,23,158069,-2 APO,28,1838887,-1 GGG,30,248139,-2 Average,32.6,786439,-0.3 [/table]
As you can see these stocks had an average of 32.6 hedge funds with bullish positions and the average amount invested in these stocks was $786 million. That figure was $3544 million in DVA's case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Packaging Corporation Of America (NYSE:PKG) is the least popular one with only 23 bullish hedge fund positions. DaVita Inc (NYSE:DVA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DVA is 50.6. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on DVA as the stock returned 34.7% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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