Here’s What Hedge Funds Think About DaVita Inc (DVA)

We at Insider Monkey have gone over 738 13F filings that hedge funds and famous value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st. In this article we look at what those investors think of DaVita Inc (NYSE:DVA).

Is DaVita Inc (NYSE:DVA) an exceptional investment right now? The best stock pickers are in a bearish mood. The number of bullish hedge fund bets were trimmed by 3 recently. Our calculations also showed that dva isn’t among the 30 most popular stocks among hedge funds. DVA was in 36 hedge funds’ portfolios at the end of the first quarter of 2019. There were 39 hedge funds in our database with DVA positions at the end of the previous quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Jeffrey Gates Gates Capital

We’re going to analyze the latest hedge fund action surrounding DaVita Inc (NYSE:DVA).

How are hedge funds trading DaVita Inc (NYSE:DVA)?

At Q1’s end, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in DVA over the last 15 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with DVA Positions

More specifically, Berkshire Hathaway was the largest shareholder of DaVita Inc (NYSE:DVA), with a stake worth $2093.7 million reported as of the end of March. Trailing Berkshire Hathaway was Gates Capital Management, which amassed a stake valued at $161.9 million. PAR Capital Management, Viking Global, and Matrix Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

Judging by the fact that DaVita Inc (NYSE:DVA) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of money managers who sold off their positions entirely in the third quarter. Interestingly, Michael A. Price and Amos Meron’s Empyrean Capital Partners sold off the biggest investment of all the hedgies watched by Insider Monkey, comprising about $120.5 million in stock, and Charles de Vaulx’s International Value Advisers was right behind this move, as the fund dropped about $72.5 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 3 funds in the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as DaVita Inc (NYSE:DVA) but similarly valued. We will take a look at ASE Technology Holding Co., Ltd. (NYSE:ASX), United Rentals, Inc. (NYSE:URI), Dropbox, Inc. (NASDAQ:DBX), and A. O. Smith Corporation (NYSE:AOS). This group of stocks’ market valuations match DVA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ASX 9 182312 2
URI 45 819606 -3
DBX 33 427201 -2
AOS 27 475457 -2
Average 28.5 476144 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.5 hedge funds with bullish positions and the average amount invested in these stocks was $476 million. That figure was $3100 million in DVA’s case. United Rentals, Inc. (NYSE:URI) is the most popular stock in this table. On the other hand ASE Technology Holding Co., Ltd. (NYSE:ASX) is the least popular one with only 9 bullish hedge fund positions. DaVita Inc (NYSE:DVA) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately DVA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on DVA were disappointed as the stock returned -17.8% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

Disclosure: None. This article was originally published at Insider Monkey.