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What Hedge Fund Sentiment Says About Digital Realty Trust, Inc. (DLR)?

We can judge whether Digital Realty Trust, Inc. (NYSE:DLR) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, research shows that these picks historically outperformed the market when we factor in known risk factors.

Digital Realty Trust, Inc. (NYSE:DLR) was in 22 hedge funds’ portfolios at the end of September. DLR has experienced an increase in enthusiasm from smart money of late. There were 14 hedge funds in our database with DLR positions at the end of the previous quarter. At the end of this article we will also compare DLR to other stocks, including CNH Industrial NV (NYSE:CNHI), Cincinnati Financial Corporation (NASDAQ:CINF), and Quest Diagnostics Inc (NYSE:DGX) to get a better sense of its popularity.

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At the moment there are numerous signals market participants put to use to appraise stocks. Some of the most innovative signals are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the top fund managers can outperform the broader indices by a superb margin (see the details here).

Keeping this in mind, let’s take a gander at the new action regarding Digital Realty Trust, Inc. (NYSE:DLR).

How have hedgies been trading Digital Realty Trust, Inc. (NYSE:DLR)?

Heading into Q4, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 57% from the previous quarter. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, John Osterweis’s Osterweis Capital Management had the largest position in Digital Realty Trust, Inc. (NYSE:DLR), worth close to $60.3 million, comprising 2.7% of its total 13F portfolio. The second most bullish hedge fund manager is Clint Carlson of Carlson Capital, with a $42.8 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Some other peers that hold long positions contain Jim Simons’s Renaissance Technologies, Paul Marshall and Ian Wace’s Marshall Wace LLP and Dmitry Balyasny’s Balyasny Asset Management.

As industry-wide interest jumped, specific money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most outsized position in Digital Realty Trust, Inc. (NYSE:DLR). Marshall Wace LLP had $29.7 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also made a $6.2 million investment in the stock during the quarter. The other funds with brand new DLR positions are Jerome Debs’s Bodri Capital Management, Paul Cantor, Joseph Weiss, and Will Wurm’s Beech Hill Partners, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s also examine hedge fund activity in other stocks similar to Digital Realty Trust, Inc. (NYSE:DLR). These stocks are CNH Industrial NV (NYSE:CNHI), Cincinnati Financial Corporation (NASDAQ:CINF), Quest Diagnostics Inc (NYSE:DGX), and Cemex SAB de CV (ADR) (NYSE:CX). All of these stocks’ market caps match DLR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CNHI 13 378744 4
CINF 23 652563 6
DGX 27 317876 -5
CX 18 186344 -3

As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $384 million, while in DLR’s case, this figure amounted to $245 million. Quest Diagnostics Inc (NYSE:DGX) is the most popular stock in this table. On the other hand CNH Industrial NV (NYSE:CNHI) is the least popular one with only 13 bullish hedge fund positions. Digital Realty Trust, Inc. (NYSE:DLR) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard DGX might be a better candidate to consider a long position.

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