At Insider Monkey, we pore over the filings of nearly 867 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30th. In this article, we will use that wealth of knowledge to determine whether or not Dropbox, Inc. (NASDAQ:DBX) makes for a good investment right now.
Dropbox, Inc. (NASDAQ:DBX) was in 41 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 51. DBX has seen an increase in hedge fund sentiment lately. There were 39 hedge funds in our database with DBX holdings at the end of June. Our calculations also showed that DBX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s go over the new hedge fund action regarding Dropbox, Inc. (NASDAQ:DBX).
Do Hedge Funds Think DBX Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DBX over the last 25 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the most valuable position in Dropbox, Inc. (NASDAQ:DBX). Renaissance Technologies has a $280.3 million position in the stock, comprising 0.4% of its 13F portfolio. The second most bullish fund manager is Baupost Group, led by Seth Klarman, holding a $271.4 million position; the fund has 2.5% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish encompass John Overdeck and David Siegel’s Two Sigma Advisors, Joe Milano’s Greenhouse Funds and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Greenhouse Funds allocated the biggest weight to Dropbox, Inc. (NASDAQ:DBX), around 6.64% of its 13F portfolio. Valiant Capital is also relatively very bullish on the stock, dishing out 4.2 percent of its 13F equity portfolio to DBX.
As industrywide interest jumped, key money managers have been driving this bullishness. Baupost Group, managed by Seth Klarman, initiated the biggest position in Dropbox, Inc. (NASDAQ:DBX). Baupost Group had $271.4 million invested in the company at the end of the quarter. Thomas Bailard’s Bailard Inc also made a $4.5 million investment in the stock during the quarter. The following funds were also among the new DBX investors: Michael Gelband’s ExodusPoint Capital, Qing Li’s Sciencast Management, and David Costen Haley’s HBK Investments.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Dropbox, Inc. (NASDAQ:DBX) but similarly valued. These stocks are Globant SA (NYSE:GLOB), Atmos Energy Corporation (NYSE:ATO), Bunge Limited (NYSE:BG), Universal Health Services, Inc. (NYSE:UHS), Axovant Sciences Ltd (NYSE:AXON), Lamar Advertising Company (NASDAQ:LAMR), and Natura &Co Holding S.A. (NYSE:NTCO). All of these stocks’ market caps match DBX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GLOB | 21 | 601276 | -2 |
| ATO | 16 | 77442 | -2 |
| BG | 37 | 538805 | -3 |
| UHS | 43 | 751314 | 2 |
| AXON | 32 | 529860 | 8 |
| LAMR | 30 | 445462 | -2 |
| NTCO | 6 | 46852 | 1 |
| Average | 26.4 | 427287 | 0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $427 million. That figure was $968 million in DBX’s case. Universal Health Services, Inc. (NYSE:UHS) is the most popular stock in this table. On the other hand Natura &Co Holding S.A. (NYSE:NTCO) is the least popular one with only 6 bullish hedge fund positions. Dropbox, Inc. (NASDAQ:DBX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DBX is 78.4. 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 positive signal but 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately DBX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on DBX were disappointed as the stock returned -15.8% since the end of September (through 11/30) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
