U.S. Markets closed

Is Digital Realty Trust, Inc. (DLR) A Good Stock To Buy ?

Abigail Fisher

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Digital Realty Trust, Inc. (NYSE:DLR).

Digital Realty Trust, Inc. (NYSE:DLR) has seen a decrease in support from the world's most elite money managers in recent months. DLR was in 17 hedge funds' portfolios at the end of September. There were 18 hedge funds in our database with DLR holdings at the end of the previous quarter. Our calculations also showed that DLR isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

According to most shareholders, hedge funds are perceived as underperforming, outdated financial tools of yesteryear. While there are over 8000 funds trading at present, We choose to focus on the leaders of this group, about 750 funds. Most estimates calculate that this group of people preside over the lion's share of the hedge fund industry's total capital, and by shadowing their unrivaled investments, Insider Monkey has uncovered several investment strategies that have historically exceeded the broader indices. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_26554" align="aligncenter" width="450"] John Burbank of Passport Capital[/caption]

John Burbank PASSPORT CAPITAL

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. 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 also rely on the best performing hedge funds' buy/sell signals. We're going to take a gander at the recent hedge fund action encompassing Digital Realty Trust, Inc. (NYSE:DLR).

What have hedge funds been doing with Digital Realty Trust, Inc. (NYSE:DLR)?

Heading into the fourth quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. On the other hand, there were a total of 34 hedge funds with a bullish position in DLR a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey's hedge fund database, Zimmer Partners, managed by Stuart J. Zimmer, holds the largest position in Digital Realty Trust, Inc. (NYSE:DLR). Zimmer Partners has a $38.9 million position in the stock, comprising 0.4% of its 13F portfolio. Coming in second is Osterweis Capital Management, led by John Osterweis, holding a $29.7 million position; 2.2% of its 13F portfolio is allocated to the stock. Some other members of the smart money that hold long positions encompass Cliff Asness's AQR Capital Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Osterweis Capital Management allocated the biggest weight to Digital Realty Trust, Inc. (NYSE:DLR), around 2.16% of its 13F portfolio. Passport Capital is also relatively very bullish on the stock, designating 2 percent of its 13F equity portfolio to DLR.

Due to the fact that Digital Realty Trust, Inc. (NYSE:DLR) has faced bearish sentiment from the aggregate hedge fund industry, it's safe to say that there exists a select few hedgies that slashed their positions entirely last quarter. Interestingly, Jeffrey Furber's AEW Capital Management sold off the largest stake of the "upper crust" of funds monitored by Insider Monkey, comprising an estimated $122.7 million in stock. Ken Griffin's fund, Citadel Investment Group, also dumped its stock, about $20.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 1 funds last quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Digital Realty Trust, Inc. (NYSE:DLR) but similarly valued. These stocks are Edison International (NYSE:EIX), Dollar Tree, Inc. (NASDAQ:DLTR), T. Rowe Price Group, Inc. (NASDAQ:TROW), and IHS Markit Ltd. (NYSE:INFO). This group of stocks' market values match DLR's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EIX,27,1708824,-6 DLTR,49,1912359,0 TROW,23,209393,-7 INFO,30,859361,2 Average,32.25,1172484,-2.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.25 hedge funds with bullish positions and the average amount invested in these stocks was $1172 million. That figure was $135 million in DLR's case. Dollar Tree, Inc. (NASDAQ:DLTR) is the most popular stock in this table. On the other hand T. Rowe Price Group, Inc. (NASDAQ:TROW) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Digital Realty Trust, Inc. (NYSE:DLR) is even less popular than TROW. Hedge funds dodged a bullet by taking a bearish stance towards DLR. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately DLR wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); DLR investors were disappointed as the stock returned -6.8% during the fourth quarter (through the end of November) 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 so far in Q4.

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

Related Content