The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Dell Technologies Inc. (NYSE:DELL) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Is Dell Technologies Inc. (NYSE:DELL) undervalued? The best stock pickers were becoming hopeful. The number of long hedge fund positions improved by 11 recently. Dell Technologies Inc. (NYSE:DELL) was in 50 hedge funds' portfolios at the end of June. The all time high for this statistics is 71. Our calculations also showed that DELL 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Steven Cohen
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we're going to go over the new hedge fund action regarding Dell Technologies Inc. (NYSE:DELL).
What does smart money think about Dell Technologies Inc. (NYSE:DELL)?
At the end of June, a total of 50 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 28% from one quarter earlier. By comparison, 40 hedge funds held shares or bullish call options in DELL a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Is DELL A Good Stock To Buy?
Among these funds, Elliott Investment Management held the most valuable stake in Dell Technologies Inc. (NYSE:DELL), which was worth $1160.7 million at the end of the third quarter. On the second spot was Canyon Capital Advisors which amassed $365.2 million worth of shares. Lyrical Asset Management, First Pacific Advisors LLC, and Point72 Asset 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 HighVista Strategies allocated the biggest weight to Dell Technologies Inc. (NYSE:DELL), around 30.97% of its 13F portfolio. Engine Capital is also relatively very bullish on the stock, earmarking 14.7 percent of its 13F equity portfolio to DELL.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into Dell Technologies Inc. (NYSE:DELL) headfirst. Iridian Asset Management, managed by David Cohen and Harold Levy, created the most outsized position in Dell Technologies Inc. (NYSE:DELL). Iridian Asset Management had $69.1 million invested in the company at the end of the quarter. Brandon Haley's Holocene Advisors also made a $65.1 million investment in the stock during the quarter. The following funds were also among the new DELL investors: Jacob Mitchell's Antipodes Partners, David Rosen's Rubric Capital Management, and Dmitry Balyasny's Balyasny Asset Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Dell Technologies Inc. (NYSE:DELL) but similarly valued. We will take a look at Lululemon Athletica inc. (NASDAQ:LULU), Roper Technologies Inc. (NYSE:ROP), TAL Education Group (NYSE:TAL), TC Energy Corporation (NYSE:TRP), Banco Santander, S.A. (NYSE:SAN), Keurig Dr Pepper Inc. (NASDAQ:KDP), and Enterprise Products Partners L.P. (NYSE:EPD). This group of stocks' market values match DELL's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LULU,39,686929,-1 ROP,45,1101856,7 TAL,40,2367131,2 TRP,21,255710,-3 SAN,16,351399,-2 KDP,29,725935,-1 EPD,30,222209,4 Average,31.4,815881,0.9 [/table]
As you can see these stocks had an average of 31.4 hedge funds with bullish positions and the average amount invested in these stocks was $816 million. That figure was $2990 million in DELL's case. Roper Technologies Inc. (NYSE:ROP) is the most popular stock in this table. On the other hand Banco Santander, S.A. (NYSE:SAN) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Dell Technologies Inc. (NYSE:DELL) is more popular among hedge funds. Our overall hedge fund sentiment score for DELL is 81.1. 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 33% in 2020 through the end of August but still managed to beat the market by 23.2 percentage points. Hedge funds were also right about betting on DELL as the stock returned 20.3% since the end of June 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.
