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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks aren't doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Delek US Holdings, Inc. (NYSE:DK) changed recently.
Is DK a good stock to buy now? The best stock pickers were taking a pessimistic view. The number of bullish hedge fund bets shrunk by 7 recently. Delek US Holdings, Inc. (NYSE:DK) was in 13 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 31. 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 for a quick look at the top 5 stocks).
Video: 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 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Fisher of Fisher Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let's check out the recent hedge fund action surrounding Delek US Holdings, Inc. (NYSE:DK).
Do Hedge Funds Think DK Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -35% from the second quarter of 2020. On the other hand, there were a total of 22 hedge funds with a bullish position in DK a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Icahn Capital LP was the largest shareholder of Delek US Holdings, Inc. (NYSE:DK), with a stake worth $117.3 million reported as of the end of September. Trailing Icahn Capital LP was Fisher Asset Management, which amassed a stake valued at $17.5 million. Encompass Capital Advisors, Millennium Management, and Citadel Investment Group 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 Icahn Capital LP allocated the biggest weight to Delek US Holdings, Inc. (NYSE:DK), around 0.68% of its 13F portfolio. Encompass Capital Advisors is also relatively very bullish on the stock, earmarking 0.66 percent of its 13F equity portfolio to DK.
Seeing as Delek US Holdings, Inc. (NYSE:DK) has experienced declining sentiment from hedge fund managers, it's safe to say that there was a specific group of money managers that decided to sell off their positions entirely last quarter. Intriguingly, Vince Maddi and Shawn Brennan's SIR Capital Management cut the biggest investment of the 750 funds tracked by Insider Monkey, valued at about $11.6 million in stock. Steve Pattyn's fund, Yaupon Capital, also cut its stock, about $3 million worth. These moves are interesting, as total hedge fund interest dropped by 7 funds last quarter.
Let's now review hedge fund activity in other stocks similar to Delek US Holdings, Inc. (NYSE:DK). These stocks are Mobileiron Inc (NASDAQ:MOBL), BellRing Brands, Inc. (NYSE:BRBR), Dillard's, Inc. (NYSE:DDS), Green Brick Partners Inc (NASDAQ:GRBK), United Natural Foods, Inc. (NASDAQ:UNFI), Boot Barn Holdings Inc (NYSE:BOOT), and Embraer SA (NYSE:ERJ). This group of stocks' market caps match DK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MOBL,25,240044,5 BRBR,11,124330,-5 DDS,14,38923,-3 GRBK,13,422136,-8 UNFI,21,59706,0 BOOT,13,33051,0 ERJ,10,40881,-4 Average,15.3,137010,-2.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.3 hedge funds with bullish positions and the average amount invested in these stocks was $137 million. That figure was $155 million in DK's case. Mobileiron Inc (NASDAQ:MOBL) is the most popular stock in this table. On the other hand Embraer SA (NYSE:ERJ) is the least popular one with only 10 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. Our overall hedge fund sentiment score for DK is 20.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on DK as the stock returned 39.2% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.