2019 Review: Top Hedge Fund Stocks vs. DENTSPLY SIRONA Inc. (XRAY)
Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients' money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space. Nevertheless, it is also possible to identify cheap large cap stocks by following the footsteps of best performing hedge funds. What do these smart investors think about DENTSPLY SIRONA Inc. (NASDAQ:XRAY)?
DENTSPLY SIRONA Inc. (NASDAQ:XRAY) was in 28 hedge funds' portfolios at the end of the third quarter of 2019. XRAY shareholders have witnessed a decrease in hedge fund interest lately. There were 29 hedge funds in our database with XRAY positions at the end of the previous quarter. Our calculations also showed that XRAY isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.
[caption id="attachment_25717" align="aligncenter" width="440"]
Steven Cohen of Point72 Asset Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind we're going to take a glance at the latest hedge fund action surrounding DENTSPLY SIRONA Inc. (NASDAQ:XRAY).
What does smart money think about DENTSPLY SIRONA Inc. (NASDAQ:XRAY)?
Heading into the fourth quarter of 2019, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. By comparison, 28 hedge funds held shares or bullish call options in XRAY a year ago. With hedgies' sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Among these funds, Generation Investment Management held the most valuable stake in DENTSPLY SIRONA Inc. (NASDAQ:XRAY), which was worth $884.5 million at the end of the third quarter. On the second spot was Select Equity Group which amassed $396.6 million worth of shares. D E Shaw, Point72 Asset Management, and AQR 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 Generation Investment Management allocated the biggest weight to DENTSPLY SIRONA Inc. (NASDAQ:XRAY), around 6.24% of its 13F portfolio. Select Equity Group is also relatively very bullish on the stock, designating 2.68 percent of its 13F equity portfolio to XRAY.
Because DENTSPLY SIRONA Inc. (NASDAQ:XRAY) has experienced bearish sentiment from the aggregate hedge fund industry, it's easy to see that there were a few funds who were dropping their full holdings in the third quarter. At the top of the heap, Dmitry Balyasny's Balyasny Asset Management sold off the largest stake of the "upper crust" of funds monitored by Insider Monkey, totaling an estimated $33.6 million in stock, and Brian Ashford-Russell and Tim Woolley's Polar Capital was right behind this move, as the fund sold off about $33.4 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds in the third quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as DENTSPLY SIRONA Inc. (NASDAQ:XRAY) but similarly valued. These stocks are BanColombia S.A. (NYSE:CIB), Roku, Inc. (NASDAQ:ROKU), J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), and Advance Auto Parts, Inc. (NYSE:AAP). This group of stocks' market caps are closest to XRAY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CIB,11,166123,1 ROKU,37,322495,4 JBHT,22,347136,2 AAP,36,1497113,-1 Average,26.5,583217,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $583 million. That figure was $1629 million in XRAY's case. Roku, Inc. (NASDAQ:ROKU) is the most popular stock in this table. On the other hand BanColombia S.A. (NYSE:CIB) is the least popular one with only 11 bullish hedge fund positions. DENTSPLY SIRONA Inc. (NASDAQ:XRAY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on XRAY as the stock returned 54.5% in 2019 (through December 23rd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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.
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