A market surge in the first quarter, spurred by easing global macroeconomic concerns and Powell's pivot ended up having a positive impact on the markets and many hedge funds as a result. The stocks of smaller companies which were especially hard hit during the fourth quarter slightly outperformed the market during the first quarter. Unfortunately, Trump is unpredictable and volatility returned in the second quarter and smaller-cap stocks went back to selling off. We finished compiling the latest 13F filings to get an idea about what hedge funds are thinking about the overall market as well as individual stocks. In this article we will study the hedge fund sentiment to see how those concerns affected their ownership of Dover Corporation (NYSE:DOV) during the quarter.
Dover Corporation (NYSE:DOV) shareholders have witnessed an increase in enthusiasm from smart money in recent months. DOV was in 30 hedge funds' portfolios at the end of the first quarter of 2019. There were 29 hedge funds in our database with DOV positions at the end of the previous quarter. Our calculations also showed that dov 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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's view the latest hedge fund action encompassing Dover Corporation (NYSE:DOV).
How are hedge funds trading Dover Corporation (NYSE:DOV)?
Heading into the second quarter of 2019, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the fourth quarter of 2018. On the other hand, there were a total of 31 hedge funds with a bullish position in DOV a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Pzena Investment Management held the most valuable stake in Dover Corporation (NYSE:DOV), which was worth $99.4 million at the end of the first quarter. On the second spot was AQR Capital Management which amassed $95.6 million worth of shares. Moreover, Millennium Management, Scopus Asset Management, and Adage Capital Management were also bullish on Dover Corporation (NYSE:DOV), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, some big names were breaking ground themselves. Renaissance Technologies, managed by Jim Simons, assembled the largest position in Dover Corporation (NYSE:DOV). Renaissance Technologies had $25 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also initiated a $13.7 million position during the quarter. The other funds with brand new DOV positions are Nick Niell's Arrowgrass Capital Partners, Jeffrey Talpins's Element Capital Management, and David Harding's Winton Capital Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Dover Corporation (NYSE:DOV) but similarly valued. These stocks are Gartner Inc (NYSE:IT), Wayfair Inc (NYSE:W), WellCare Health Plans, Inc. (NYSE:WCG), and Conagra Brands, Inc. (NYSE:CAG). This group of stocks' market values match DOV's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IT,15,1205964,-6 W,30,2455188,2 WCG,47,1898984,8 CAG,33,811917,0 Average,31.25,1593013,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $1593 million. That figure was $475 million in DOV's case. WellCare Health Plans, Inc. (NYSE:WCG) is the most popular stock in this table. On the other hand Gartner Inc (NYSE:IT) is the least popular one with only 15 bullish hedge fund positions. Dover Corporation (NYSE:DOV) 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately DOV wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); DOV investors were disappointed as the stock returned -3.2% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.