We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of DENTSPLY SIRONA Inc. (NASDAQ:XRAY).
Is DENTSPLY SIRONA Inc. (NASDAQ:XRAY) going to take off soon? Investors who are in the know are turning less bullish. The number of bullish hedge fund bets shrunk by 2 lately. Our calculations also showed that XRAY isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_189672" align="aligncenter" width="400"] David Blood of Generation Investment Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. With all of this in mind we're going to check out the fresh hedge fund action encompassing DENTSPLY SIRONA Inc. (NASDAQ:XRAY).
What does smart money think about DENTSPLY SIRONA Inc. (NASDAQ:XRAY)?
At the end of the fourth quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from one quarter earlier. On the other hand, there were a total of 27 hedge funds with a bullish position in XRAY 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.
The largest stake in DENTSPLY SIRONA Inc. (NASDAQ:XRAY) was held by Generation Investment Management, which reported holding $918.1 million worth of stock at the end of September. It was followed by Select Equity Group with a $256.3 million position. Other investors bullish on the company included Balyasny Asset Management, D E Shaw, and Millennium Management. In terms of the portfolio weights assigned to each position Generation Investment Management allocated the biggest weight to DENTSPLY SIRONA Inc. (NASDAQ:XRAY), around 5.87% of its 13F portfolio. Select Equity Group is also relatively very bullish on the stock, dishing out 1.62 percent of its 13F equity portfolio to XRAY.
Since DENTSPLY SIRONA Inc. (NASDAQ:XRAY) has experienced declining sentiment from the aggregate hedge fund industry, it's safe to say that there was a specific group of fund managers who sold off their entire stakes in the third quarter. Interestingly, Steve Cohen's Point72 Asset Management dumped the largest position of the "upper crust" of funds followed by Insider Monkey, valued at an estimated $80.1 million in stock, and David Harding's Winton Capital Management was right behind this move, as the fund sold off about $3.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 2 funds in the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as DENTSPLY SIRONA Inc. (NASDAQ:XRAY) but similarly valued. These stocks are Lamb Weston Holdings, Inc. (NYSE:LW), Universal Health Services, Inc. (NYSE:UHS), American Airlines Group Inc (NASDAQ:AAL), and United Rentals, Inc. (NYSE:URI). All of these 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 LW,32,381958,-3 UHS,31,483243,3 AAL,41,2005005,-2 URI,54,1223368,-5 Average,39.5,1023394,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.5 hedge funds with bullish positions and the average amount invested in these stocks was $1023 million. That figure was $1468 million in XRAY's case. United Rentals, Inc. (NYSE:URI) is the most popular stock in this table. On the other hand Universal Health Services, Inc. (NYSE:UHS) is the least popular one with only 31 bullish hedge fund positions. Compared to these stocks DENTSPLY SIRONA Inc. (NASDAQ:XRAY) is even less popular than UHS. Hedge funds dodged a bullet by taking a bearish stance towards XRAY. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately XRAY wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); XRAY investors were disappointed as the stock returned -37.8% 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 so far in Q1.
Disclosure: None. This article was originally published at Insider Monkey.