Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about DuPont de Nemours, Inc. (NYSE:DD) in this article.
DuPont de Nemours, Inc. (NYSE:DD) has experienced a decrease in hedge fund sentiment of late. Overall hedge fund sentiment towards the stock is at its all time low. Our calculations also showed that DD isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? 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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a look at the latest hedge fund action regarding DuPont de Nemours, Inc. (NYSE:DD).
How have hedgies been trading DuPont de Nemours, Inc. (NYSE:DD)?
Heading into the third quarter of 2019, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from one quarter earlier. By comparison, 75 hedge funds held shares or bullish call options in DD a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Among these funds, Maverick Capital held the most valuable stake in DuPont de Nemours, Inc. (NYSE:DD), which was worth $323.7 million at the end of the second quarter. On the second spot was Millennium Management which amassed $94.7 million worth of shares. Moreover, Adage Capital Management, Renaissance Technologies, and York Capital Management were also bullish on DuPont de Nemours, Inc. (NYSE:DD), allocating a large percentage of their portfolios to this stock.
Seeing as DuPont de Nemours, Inc. (NYSE:DD) has witnessed a decline in interest from hedge fund managers, logic holds that there exists a select few fund managers that decided to sell off their entire stakes by the end of the second quarter. Interestingly, Dan Loeb's Third Point dropped the biggest stake of all the hedgies watched by Insider Monkey, valued at about $466.2 million in call options. OZ Management also dropped its call options, about $207.6 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 19 funds by the end of the second quarter.
Let's go over hedge fund activity in other stocks similar to DuPont de Nemours, Inc. (NYSE:DD). We will take a look at General Motors Company (NYSE:GM), Allergan plc (NYSE:AGN), Crown Castle International Corp. (REIT) (NYSE:CCI), and Takeda Pharmaceutical Company Limited (NYSE:TAK). This group of stocks' market valuations are similar to DD's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GM,49,5743946,-4 AGN,80,6167857,27 CCI,33,1910373,-2 TAK,27,1289782,-8 Average,47.25,3777990,3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 47.25 hedge funds with bullish positions and the average amount invested in these stocks was $3778 million. That figure was $1024 million in DD's case. Allergan plc (NYSE:AGN) is the most popular stock in this table. On the other hand Takeda Pharmaceutical Company Limited (NYSE:TAK) is the least popular one with only 27 bullish hedge fund positions. DuPont de Nemours, Inc. (NYSE:DD) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately DD wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); DD investors were disappointed as the stock returned -4.6% during the third quarter 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 many of these stocks already outperformed the market so far in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.