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Is Dynatrace, Inc. (DT) A Good Stock To Buy?

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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 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 Dynatrace, Inc. (NYSE:DT) in this article.

Is DT a good stock to buy? Dynatrace, Inc. (NYSE:DT) investors should be aware of a decrease in hedge fund sentiment in recent months. Dynatrace, Inc. (NYSE:DT) was in 52 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 53. There were 53 hedge funds in our database with DT holdings at the end of December. Our calculations also showed that DT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

At the moment there are a lot of indicators stock market investors have at their disposal to analyze their holdings. Some of the most underrated indicators are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the elite investment managers can trounce the S&P 500 by a superb margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Ryan Frick Dorsal Capital
Ryan Frick Dorsal Capital

Ryan Frick of Dorsal Capital

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. With all of this in mind let's take a glance at the new hedge fund action encompassing Dynatrace, Inc. (NYSE:DT).

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

At the end of the first quarter, a total of 52 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards DT over the last 23 quarters. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Is DT A Good Stock To Buy?
Is DT A Good Stock To Buy?

More specifically, HMI Capital was the largest shareholder of Dynatrace, Inc. (NYSE:DT), with a stake worth $312.9 million reported as of the end of March. Trailing HMI Capital was SRS Investment Management, which amassed a stake valued at $292.6 million. Alkeon Capital Management, Matrix Capital Management, and Dorsal Capital Management 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 HMI Capital allocated the biggest weight to Dynatrace, Inc. (NYSE:DT), around 11.16% of its 13F portfolio. Cota Capital is also relatively very bullish on the stock, setting aside 9.04 percent of its 13F equity portfolio to DT.

Due to the fact that Dynatrace, Inc. (NYSE:DT) has experienced a decline in interest from the smart money, it's easy to see that there lies a certain "tier" of money managers who sold off their positions entirely heading into Q2. Intriguingly, Philippe Laffont's Coatue Management said goodbye to the biggest position of the "upper crust" of funds tracked by Insider Monkey, valued at close to $279.8 million in stock. Aaron Cowen's fund, Suvretta Capital Management, also dumped its stock, about $94.3 million worth. These moves are important to note, as total hedge fund interest dropped by 1 funds heading into Q2.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Dynatrace, Inc. (NYSE:DT) but similarly valued. We will take a look at Leidos Holdings Inc (NYSE:LDOS), James Hardie Industries plc (NYSE:JHX), NovoCure Limited (NASDAQ:NVCR), Alliant Energy Corporation (NYSE:LNT), Evergy, Inc. (NYSE:EVRG), Mohawk Industries, Inc. (NYSE:MHK), and Tenaris S.A. (NYSE:TS). This group of stocks' market valuations resemble DT's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LDOS,18,93802,4 JHX,4,12557,0 NVCR,22,292428,0 LNT,13,98600,-16 EVRG,30,1197999,-3 MHK,36,1297287,-3 TS,10,327456,-2 Average,19,474304,-2.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $474 million. That figure was $1638 million in DT's case. Mohawk Industries, Inc. (NYSE:MHK) is the most popular stock in this table. On the other hand James Hardie Industries plc (NYSE:JHX) is the least popular one with only 4 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 83.4. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 17.2% in 2021 through June 11th but still managed to beat the market by 3.3 percentage points. Hedge funds were also right about betting on DT as the stock returned 14.9% since the end of March (through 6/11) 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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