Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.
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. 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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to view the key hedge fund action surrounding Deutsche Bank Aktiengesellschaft (NYSE:DB).
Hedge fund activity in Deutsche Bank Aktiengesellschaft (NYSE:DB)
At Q4’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 56% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in DB a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Hudson Executive Capital held the most valuable stake in Deutsche Bank Aktiengesellschaft (NYSE:DB), which was worth $528.6 million at the end of the third quarter. On the second spot was Cerberus Capital Management which amassed $495.6 million worth of shares. Moreover, Tontine Asset Management, Citadel Investment Group, and Shah Capital Management were also bullish on Deutsche Bank Aktiengesellschaft (NYSE:DB), allocating a large percentage of their portfolios to this stock.
Now, key hedge funds have jumped into Deutsche Bank Aktiengesellschaft (NYSE:DB) headfirst. Tontine Asset Management, managed by Jeffrey Gendell, established the biggest call position in Deutsche Bank Aktiengesellschaft (NYSE:DB). Tontine Asset Management had $16 million invested in the company at the end of the quarter. Himanshu H. Shah’s Shah Capital Management also made a $10.6 million investment in the stock during the quarter. The following funds were also among the new DB investors: Nick Niell’s Arrowgrass Capital Partners, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Boaz Weinstein’s Saba Capital.
Let’s now review hedge fund activity in other stocks similar to Deutsche Bank Aktiengesellschaft (NYSE:DB). These stocks are Shinhan Financial Group Co., Ltd. (NYSE:SHG), Teva Pharmaceutical Industries Limited (NYSE:TEVA), Expedia Group, Inc. (NASDAQ:EXPE), and Align Technology, Inc. (NASDAQ:ALGN). All of these stocks’ market caps are similar to DB’s market cap.
|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 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $1419 million. That figure was $1068 million in DB’s case. Expedia Group, Inc. (NASDAQ:EXPE) is the most popular stock in this table. On the other hand Shinhan Financial Group Co., Ltd. (NYSE:SHG) is the least popular one with only 7 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. 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 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately DB wasn’t in this group. Hedge funds that bet on DB were disappointed as the stock returned 9.0% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.