We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Delek US Holdings, Inc. (NYSE:DK) based on that data.
Delek US Holdings, Inc. (NYSE:DK) shareholders have witnessed a decrease in support from the world's most elite money managers recently. DK was in 16 hedge funds' portfolios at the end of the first quarter of 2020. There were 19 hedge funds in our database with DK positions at the end of the previous quarter. Our calculations also showed that DK isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_25910" align="aligncenter" width="400"] Carl Icahn of Icahn Capital[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's view the latest hedge fund action regarding Delek US Holdings, Inc. (NYSE:DK).
Hedge fund activity in Delek US Holdings, Inc. (NYSE:DK)
At Q1's end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the previous quarter. By comparison, 28 hedge funds held shares or bullish call options in DK a year ago. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Among these funds, Icahn Capital LP held the most valuable stake in Delek US Holdings, Inc. (NYSE:DK), which was worth $166.1 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $11.9 million worth of shares. Millennium Management, Citadel Investment Group, and Arosa 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 Yaupon Capital allocated the biggest weight to Delek US Holdings, Inc. (NYSE:DK), around 3.2% of its 13F portfolio. Icahn Capital LP is also relatively very bullish on the stock, designating 0.92 percent of its 13F equity portfolio to DK.
Since Delek US Holdings, Inc. (NYSE:DK) has witnessed bearish sentiment from hedge fund managers, it's safe to say that there lies a certain "tier" of hedgies that elected to cut their entire stakes heading into Q4. It's worth mentioning that Noam Gottesman's GLG Partners dumped the biggest stake of all the hedgies followed by Insider Monkey, comprising an estimated $4.1 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also sold off its stock, about $2.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds heading into Q4.
Let's check out hedge fund activity in other stocks similar to Delek US Holdings, Inc. (NYSE:DK). We will take a look at Xenia Hotels & Resorts Inc (NYSE:XHR), Steelcase Inc. (NYSE:SCS), First Bancorp (NYSE:FBP), and Verra Mobility Corporation (NASDAQ:VRRM). This group of stocks' market valuations resemble DK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position XHR,8,12427,-3 SCS,23,64288,-7 FBP,24,132891,-8 VRRM,23,105855,-10 Average,19.5,78865,-7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $203 million in DK's case. First Bancorp (NYSE:FBP) is the most popular stock in this table. On the other hand Xenia Hotels & Resorts Inc (NYSE:XHR) is the least popular one with only 8 bullish hedge fund positions. Delek US Holdings, Inc. (NYSE:DK) 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 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately DK wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); DK investors were disappointed as the stock returned 10.6% during 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.
Disclosure: None. This article was originally published at Insider Monkey.