The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Dropbox, Inc. (NASDAQ:DBX) and determine whether the smart money was really smart about this stock.
Is Dropbox, Inc. (NASDAQ:DBX) the right investment to pursue these days? Investors who are in the know were in an optimistic mood. The number of bullish hedge fund bets advanced by 7 in recent months. Dropbox, Inc. (NASDAQ:DBX) was in 51 hedge funds' portfolios at the end of June. This is the new all time high for this statistics. Our calculations also showed that DBX isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. 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 precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind let's review the fresh hedge fund action encompassing Dropbox, Inc. (NASDAQ:DBX).
Hedge fund activity in Dropbox, Inc. (NASDAQ:DBX)
At the end of June, a total of 51 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from one quarter earlier. On the other hand, there were a total of 43 hedge funds with a bullish position in DBX a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Dropbox, Inc. (NASDAQ:DBX), with a stake worth $483.8 million reported as of the end of September. Trailing Renaissance Technologies was SoMa Equity Partners, which amassed a stake valued at $136.6 million. Arrowstreet Capital, D E Shaw, and Millennium 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 Greenvale Capital allocated the biggest weight to Dropbox, Inc. (NASDAQ:DBX), around 5.36% of its 13F portfolio. SoMa Equity Partners is also relatively very bullish on the stock, dishing out 5.33 percent of its 13F equity portfolio to DBX.
As industrywide interest jumped, some big names have been driving this bullishness. Greenhouse Funds, managed by Joe Milano, established the most valuable position in Dropbox, Inc. (NASDAQ:DBX). Greenhouse Funds had $26.5 million invested in the company at the end of the quarter. George Baxter's Sabrepoint Capital also initiated a $9.4 million position during the quarter. The other funds with new positions in the stock are Chuck Royce's Royce & Associates, C. Jonathan Gattman's Cloverdale Capital Management, and Anthony S. Daffer's Provenire Capital.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Dropbox, Inc. (NASDAQ:DBX) but similarly valued. These stocks are Autohome Inc (NYSE:ATHM), Banco de Chile (NYSE:BCH), Lennox International Inc. (NYSE:LII), Centrais Eletricas Brasileiras SA (NYSE:EBR), The Western Union Company (NYSE:WU), Camden Property Trust (NYSE:CPT), and ICON Public Limited Company (NASDAQ:ICLR). This group of stocks' market caps are similar to DBX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ATHM,24,820669,9 BCH,3,38541,-1 LII,24,258111,3 EBR,8,10334,3 WU,34,622814,0 CPT,26,336306,-6 ICLR,24,590357,3 Average,20.4,382447,1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.4 hedge funds with bullish positions and the average amount invested in these stocks was $382 million. That figure was $1326 million in DBX's case. The Western Union Company (NYSE:WU) is the most popular stock in this table. On the other hand Banco de Chile (NYSE:BCH) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Dropbox, Inc. (NASDAQ:DBX) is more popular among hedge funds. Our overall hedge fund sentiment score for DBX is 86.8. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately DBX wasn't nearly as popular as these 10 stocks and hedge funds that were betting on DBX were disappointed as the stock returned -2.8% since the end of the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.