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Is Dynatrace (DT) Stock A Buy or Sell?

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Abigail Fisher
·5 min read
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In this article we will check out the progression of hedge fund sentiment towards Dynatrace, Inc. (NYSE:DT) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is DT stock a buy or sell? Dynatrace, Inc. (NYSE:DT) was in 53 hedge funds' portfolios at the end of December. The all time high for this statistic is 46. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. DT investors should be aware of an increase in support from the world's most elite money managers lately. There were 46 hedge funds in our database with DT holdings at the end of September. Our calculations also showed that DT isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In the 21st century investor’s toolkit there are a multitude of formulas stock market investors have at their disposal to value publicly traded companies. A duo of the most innovative formulas are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the best hedge fund managers can trounce their index-focused peers by a very impressive margin (see the details here).

Aaron Cowen Suvretta Capital
Aaron Cowen Suvretta Capital

Aaron Cowen of Suvretta Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage (or at the end of this article). Keeping this in mind let's go over the recent hedge fund action regarding Dynatrace, Inc. (NYSE:DT).

Do Hedge Funds Think DT Is A Good Stock To Buy Now?

At fourth quarter's end, a total of 53 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DT over the last 22 quarters. With hedge funds' capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

The largest stake in Dynatrace, Inc. (NYSE:DT) was held by Coatue Management, which reported holding $279.8 million worth of stock at the end of December. It was followed by SRS Investment Management with a $271 million position. Other investors bullish on the company included HMI Capital, Citadel Investment Group, and Matrix Capital Management. In terms of the portfolio weights assigned to each position HMI Capital allocated the biggest weight to Dynatrace, Inc. (NYSE:DT), around 10.34% of its 13F portfolio. Shannon River Fund Management is also relatively very bullish on the stock, designating 7.82 percent of its 13F equity portfolio to DT.

As aggregate interest increased, some big names were leading the bulls' herd. Suvretta Capital Management, managed by Aaron Cowen, established the most valuable position in Dynatrace, Inc. (NYSE:DT). Suvretta Capital Management had $94.3 million invested in the company at the end of the quarter. Frank Fu's CaaS Capital also initiated a $73.2 million position during the quarter. The following funds were also among the new DT investors: Richard Merage's MIG Capital, Gavin Baker's Atreides Management, and Jeffrey Talpins's Element Capital Management.

Let's now review hedge fund activity in other stocks similar to Dynatrace, Inc. (NYSE:DT). These stocks are The Boston Beer Company Inc (NYSE:SAM), Wynn Resorts, Limited (NASDAQ:WYNN), Graco Inc. (NYSE:GGG), Qiagen NV (NYSE:QGEN), Atmos Energy Corporation (NYSE:ATO), Booz Allen Hamilton Holding Corporation (NYSE:BAH), and PPD, Inc. (NASDAQ:PPD). This group of stocks' market valuations are closest to DT's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SAM,35,1143708,-1 WYNN,52,1104483,9 GGG,25,269383,-5 QGEN,24,670099,-5 ATO,25,274618,7 BAH,27,305001,-4 PPD,29,703701,-4 Average,31,638713,-0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $639 million. That figure was $2024 million in DT's case. Wynn Resorts, Limited (NASDAQ:WYNN) is the most popular stock in this table. On the other hand Qiagen NV (NYSE:QGEN) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Dynatrace, Inc. (NYSE:DT) is more popular among hedge funds. Our overall hedge fund sentiment score for DT is 90. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 5.3% in 2021 through March 19th but still managed to beat the market by 0.8 percentage points. Hedge funds were also right about betting on DT as the stock returned 17.6% since the end of December (through 3/19) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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