"The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak," are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards DENTSPLY SIRONA Inc. (NASDAQ:XRAY) and see how it was affected.
DENTSPLY SIRONA Inc. (NASDAQ:XRAY) has experienced an increase in activity from the world's largest hedge funds of late. Our calculations also showed that XRAY isn't among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a look at the latest hedge fund action encompassing DENTSPLY SIRONA Inc. (NASDAQ:XRAY).
What does the smart money think about DENTSPLY SIRONA Inc. (NASDAQ:XRAY)?
At the end of the first quarter, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards XRAY over the last 15 quarters. So, let's review 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 $1037.3 million worth of stock at the end of March. It was followed by Select Equity Group with a $426 million position. Other investors bullish on the company included Citadel Investment Group, D E Shaw, and Adage Capital Management.
As aggregate interest increased, key money managers were leading the bulls' herd. Cadian Capital, managed by Eric Bannasch, assembled the largest position in DENTSPLY SIRONA Inc. (NASDAQ:XRAY). Cadian Capital had $16.9 million invested in the company at the end of the quarter. Doug Gordon, Jon Hilsabeck and Don Jabro's Shellback Capital also initiated a $13.7 million position during the quarter. The other funds with new positions in the stock are Jeffrey Talpins's Element Capital Management, Efrem Kamen's Pura Vida Investments, and Andrew Feldstein and Stephen Siderow's Blue Mountain Capital.
Let's now review hedge fund activity in other stocks similar to DENTSPLY SIRONA Inc. (NASDAQ:XRAY). These stocks are Melco Resorts & Entertainment Limited (NASDAQ:MLCO), Paycom Software Inc (NYSE:PAYC), Cabot Oil & Gas Corporation (NYSE:COG), and Ally Financial Inc (NYSE:ALLY). This group of stocks' market values are closest to XRAY's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MLCO,22,394196,1 PAYC,25,318253,6 COG,32,944075,-1 ALLY,35,2048431,-1 Average,28.5,926239,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.5 hedge funds with bullish positions and the average amount invested in these stocks was $926 million. That figure was $1834 million in XRAY's case. Ally Financial Inc (NYSE:ALLY) is the most popular stock in this table. On the other hand Melco Resorts & Entertainment Limited (NASDAQ:MLCO) is the least popular one with only 22 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on XRAY as the stock returned 7.9% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.