Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published this article and predicted that US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on Dell Technologies Inc. (NYSE:DELL).
Is Dell Technologies Inc. (NYSE:DELL) worth your attention right now? Prominent investors are in a bearish mood. The number of bullish hedge fund positions shrunk by 6 lately. Our calculations also showed that DELL isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). DELL was in 41 hedge funds' portfolios at the end of the fourth quarter of 2019. There were 47 hedge funds in our database with DELL holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
At the moment there are many formulas stock traders use to evaluate stocks. A pair of the most underrated formulas are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the best hedge fund managers can outpace their index-focused peers by a very impressive amount (see the details here).
[caption id="attachment_26345" align="aligncenter" width="400"] Paul Singer of Elliott Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind let's take a glance at the recent hedge fund action regarding Dell Technologies Inc. (NYSE:DELL).
What does smart money think about Dell Technologies Inc. (NYSE:DELL)?
Heading into the first quarter of 2020, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the third quarter of 2019. By comparison, 43 hedge funds held shares or bullish call options in DELL a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Elliott Management held the most valuable stake in Dell Technologies Inc. (NYSE:DELL), which was worth $777.5 million at the end of the third quarter. On the second spot was Canyon Capital Advisors which amassed $312.9 million worth of shares. Elliott Management, Point72 Asset Management, and Lakewood 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 HighVista Strategies allocated the biggest weight to Dell Technologies Inc. (NYSE:DELL), around 26.55% of its 13F portfolio. Shelter Haven Capital Management is also relatively very bullish on the stock, designating 7.97 percent of its 13F equity portfolio to DELL.
Due to the fact that Dell Technologies Inc. (NYSE:DELL) has witnessed declining sentiment from the aggregate hedge fund industry, it's easy to see that there is a sect of funds who sold off their positions entirely in the third quarter. Intriguingly, Glenn Fuhrman and John Phelan's MSD Capital sold off the largest position of the "upper crust" of funds monitored by Insider Monkey, totaling an estimated $235.4 million in stock, and Marc Lisker, Glenn Fuhrman and John Phelan's MSDC Management was right behind this move, as the fund dropped about $129.2 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 6 funds in the third quarter.
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 Delta Air Lines, Inc. (NYSE:DAL), Workday Inc (NASDAQ:WDAY), Prudential Financial Inc (NYSE:PRU), and Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA). This group of stocks' market caps are closest to DELL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DAL,70,7037405,-1 WDAY,55,2251111,11 PRU,36,691519,6 BBVA,8,338963,-2 Average,42.25,2579750,3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.25 hedge funds with bullish positions and the average amount invested in these stocks was $2580 million. That figure was $2362 million in DELL's case. Delta Air Lines, Inc. (NYSE:DAL) is the most popular stock in this table. On the other hand Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA) is the least popular one with only 8 bullish hedge fund positions. Dell Technologies Inc. (NYSE:DELL) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th but beat the market by 1.9 percentage points. Unfortunately DELL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); DELL investors were disappointed as the stock returned -29.5% during the same time period 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 most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.