A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on DaVita Inc (NYSE:DVA).
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 market by 18 percentage points since May 2014 through December 3, 2018 (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 our short portfolio.
Let’s analyze the new hedge fund action surrounding DaVita Inc (NYSE:DVA).
How have hedgies been trading DaVita Inc (NYSE:DVA)?
Heading into the fourth quarter of 2018, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 24% from one quarter earlier. By comparison, 40 hedge funds held shares or bullish call options in DVA heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in DaVita Inc (NYSE:DVA) was held by Berkshire Hathaway, which reported holding $2762.5 million worth of stock at the end of September. It was followed by Empyrean Capital Partners with a $171.5 million position. Other investors bullish on the company included Matrix Capital Management, Gates Capital Management, and PAR Capital Management.
As one would reasonably expect, key money managers were leading the bulls’ herd. Bridgewater Associates, managed by Ray Dalio, established the largest position in DaVita Inc (NYSE:DVA). Bridgewater Associates had $13.6 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also made a $13.2 million investment in the stock during the quarter. The following funds were also among the new DVA investors: Israel Englander’s Millennium Management, Charles Davidson and Joseph Jacobs’s Wexford Capital, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s go over hedge fund activity in other stocks similar to DaVita Inc (NYSE:DVA). These stocks are CenterPoint Energy, Inc. (NYSE:CNP), Invitation Homes Inc. (NYSE:INVH), Universal Health Services, Inc. (NYSE:UHS), and Andeavor Logistics LP (NYSE:ANDX). This group of stocks’ market values are closest to DVA’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $694 million. That figure was $4.00 billion in DVA’s case. CenterPoint Energy, Inc. (NYSE:CNP) is the most popular stock in this table. On the other hand Andeavor Logistics LP (NYSE:ANDX) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks DaVita Inc (NYSE:DVA) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.