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Is Delek US Holdings, Inc. (DK) Going to Burn These Hedge Funds?

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Nina Todic
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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 752 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 September 30th. In this article we look at what those investors think of Delek US Holdings, Inc. (NYSE:DK).

Is Delek US Holdings, Inc. (NYSE:DK) a healthy stock for your portfolio? Prominent investors are becoming hopeful. The number of long hedge fund bets inched up by 3 recently. Our calculations also showed that DK isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). DK was in 21 hedge funds' portfolios at the end of September. There were 18 hedge funds in our database with DK holdings at the end of the previous quarter.

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_745225" align="aligncenter" width="473"]

Noam Gottesman GLG Partners
Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners[/caption]

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to analyze the recent hedge fund action regarding Delek US Holdings, Inc. (NYSE:DK).

Hedge fund activity in Delek US Holdings, Inc. (NYSE:DK)

Heading into the fourth quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from one quarter earlier. On the other hand, there were a total of 31 hedge funds with a bullish position in DK a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Ken Fisher's Fisher Asset Management has the biggest position in Delek US Holdings, Inc. (NYSE:DK), worth close to $38.1 million, amounting to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, led by Ken Griffin, holding a $21.3 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism encompass Roy Vermus and Shlomi Bracha's Noked Capital, Noam Gottesman's GLG Partners and Cliff Asness's AQR Capital Management. In terms of the portfolio weights assigned to each position Noked Capital allocated the biggest weight to Delek US Holdings, Inc. (NYSE:DK), around 8.12% of its 13F portfolio. BP Capital is also relatively very bullish on the stock, designating 1.47 percent of its 13F equity portfolio to DK.

With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Fairfax Financial Holdings, managed by Prem Watsa, initiated the biggest position in Delek US Holdings, Inc. (NYSE:DK). Fairfax Financial Holdings had $1.8 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also made a $1.7 million investment in the stock during the quarter. The following funds were also among the new DK investors: Michael Kharitonov and Jon David McAuliffe's Voleon Capital, Brandon Haley's Holocene Advisors, and David E. Shaw's D E Shaw.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Delek US Holdings, Inc. (NYSE:DK) but similarly valued. These stocks are Taylor Morrison Home Corporation (NYSE:TMHC), Transocean Ltd (NYSE:RIG), SINA Corporation (NASDAQ:SINA), and CONMED Corporation (NASDAQ:CNMD). This group of stocks' market values resemble DK's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TMHC,24,375208,5 RIG,36,256394,5 SINA,19,256685,0 CNMD,22,201980,3 Average,25.25,272567,3.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $273 million. That figure was $87 million in DK's case. Transocean Ltd (NYSE:RIG) is the most popular stock in this table. On the other hand SINA Corporation (NASDAQ:SINA) is the least popular one with only 19 bullish hedge fund positions. Delek US Holdings, Inc. (NYSE:DK) 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately DK wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); DK investors were disappointed as the stock returned -4.7% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

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