At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Delek US Holdings, Inc. (NYSE:DK) was in 28 hedge funds’ portfolios at the end of the first quarter of 2019. DK has experienced an increase in support from the world’s most elite money managers of late. There were 27 hedge funds in our database with DK positions at the end of the previous quarter. Our calculations also showed that DK isn’t among the 30 most popular stocks among hedge funds.
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 40 percentage points since May 2014 through May 30, 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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to check out the recent hedge fund action regarding Delek US Holdings, Inc. (NYSE:DK).
How are hedge funds trading Delek US Holdings, Inc. (NYSE:DK)?
At Q1’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in DK a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in Delek US Holdings, Inc. (NYSE:DK), which was worth $30.7 million at the end of the first quarter. On the second spot was Point72 Asset Management which amassed $17.4 million worth of shares. Moreover, Point72 Asset Management, Encompass Capital Advisors, and GLG Partners were also bullish on Delek US Holdings, Inc. (NYSE:DK), allocating a large percentage of their portfolios to this stock.
Now, some big names were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, created the largest call position in Delek US Holdings, Inc. (NYSE:DK). Point72 Asset Management had $14.6 million invested in the company at the end of the quarter. Todd J. Kantor’s Encompass Capital Advisors also initiated a $14.2 million position during the quarter. The following funds were also among the new DK investors: Roy Vermus and Shlomi Bracha’s Noked Capital, George McCabe’s Portolan Capital Management, and Clint Carlson’s Carlson Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Delek US Holdings, Inc. (NYSE:DK) but similarly valued. We will take a look at MakeMyTrip Limited (NASDAQ:MMYT), Range Resources Corp. (NYSE:RRC), The Descartes Systems Group Inc (NASDAQ:DSGX), and BancorpSouth Bank (NYSE:BXS). This group of stocks’ market valuations are closest to DK’s market valuation.
|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 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $275 million. That figure was $144 million in DK’s case. Range Resources Corp. (NYSE:RRC) is the most popular stock in this table. On the other hand BancorpSouth Bank (NYSE:BXS) is the least popular one with only 9 bullish hedge fund positions. Delek US Holdings, Inc. (NYSE:DK) 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 DK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on DK were disappointed as the stock returned -12.4% 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.