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While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Deutsche Bank Aktiengesellschaft (NYSE:DB).
Deutsche Bank Aktiengesellschaft (NYSE:DB) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 16 hedge funds' portfolios at the end of the first quarter of 2021. Our calculations also showed that DB isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Expedia Group Inc (NASDAQ:EXPE), Carnival Corporation & plc (NYSE:CUK), and Maxim Integrated Products Inc. (NASDAQ:MXIM) to gather more data points.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Crispin Odey of Odey Asset Management Group
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. Keeping this in mind let's take a glance at the latest hedge fund action encompassing Deutsche Bank Aktiengesellschaft (NYSE:DB).
Do Hedge Funds Think DB Is A Good Stock To Buy Now?
At first quarter's end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in DB over the last 23 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Deutsche Bank Aktiengesellschaft (NYSE:DB) was held by Hudson Executive Capital, which reported holding $801.2 million worth of stock at the end of December. It was followed by Cerberus Capital Management with a $741.4 million position. Other investors bullish on the company included Arrowstreet Capital, Masters Capital Management, and Odey Asset Management Group. In terms of the portfolio weights assigned to each position Hudson Executive Capital allocated the biggest weight to Deutsche Bank Aktiengesellschaft (NYSE:DB), around 49.73% of its 13F portfolio. Cerberus Capital Management is also relatively very bullish on the stock, designating 20.51 percent of its 13F equity portfolio to DB.
Seeing as Deutsche Bank Aktiengesellschaft (NYSE:DB) has witnessed falling interest from hedge fund managers, logic holds that there exists a select few hedge funds that elected to cut their full holdings in the first quarter. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace LLP sold off the biggest investment of all the hedgies followed by Insider Monkey, totaling an estimated $21 million in stock, and Michael Gelband's ExodusPoint Capital was right behind this move, as the fund dropped about $0.9 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to Deutsche Bank Aktiengesellschaft (NYSE:DB). These stocks are Expedia Group Inc (NASDAQ:EXPE), Carnival Corporation & plc (NYSE:CUK), Maxim Integrated Products Inc. (NASDAQ:MXIM), DraftKings Inc. (NASDAQ:DKNG), Arthur J. Gallagher & Co. (NYSE:AJG), Nasdaq, Inc. (NASDAQ:NDAQ), and The Clorox Company (NYSE:CLX). This group of stocks' market caps match DB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EXPE,86,6157292,10 CUK,4,105412,-3 MXIM,55,3238393,1 DKNG,43,966256,-5 AJG,24,283959,0 NDAQ,22,236137,-5 CLX,38,1195544,-1 Average,38.9,1740428,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.9 hedge funds with bullish positions and the average amount invested in these stocks was $1740 million. That figure was $1774 million in DB's case. Expedia Group Inc (NASDAQ:EXPE) is the most popular stock in this table. On the other hand Carnival Corporation & plc (NYSE:CUK) is the least popular one with only 4 bullish hedge fund positions. Deutsche Bank Aktiengesellschaft (NYSE:DB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DB is 32.3. 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. 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 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 gained 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately DB wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); DB investors were disappointed as the stock returned 3.6% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.