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Is Deere & Company (DE) Going to Burn These Hedge Funds?

In this article you are going to find out whether hedge funds think Deere & Company (NYSE:DE) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Deere & Company (NYSE:DE) has experienced a decrease in support from the world’s most elite money managers of late. DE was in 44 hedge funds’ portfolios at the end of March. There were 50 hedge funds in our database with DE holdings at the end of the previous quarter. Our calculations also showed that DE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 44 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the recent hedge fund action surrounding Deere & Company (NYSE:DE).

What have hedge funds been doing with Deere & Company (NYSE:DE)?

Heading into the second quarter of 2020, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from the previous quarter. On the other hand, there were a total of 31 hedge funds with a bullish position in DE 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.

The largest stake in Deere & Company (NYSE:DE) was held by Greenhaven Associates, which reported holding $139.8 million worth of stock at the end of September. It was followed by Markel Gayner Asset Management with a $139 million position. Other investors bullish on the company included Adage Capital Management, Suvretta Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Caxton Associates LP allocated the biggest weight to Deere & Company (NYSE:DE), around 5.84% of its 13F portfolio. Firefly Value Partners is also relatively very bullish on the stock, dishing out 5.41 percent of its 13F equity portfolio to DE.

Because Deere & Company (NYSE:DE) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedge funds that decided to sell off their full holdings by the end of the third quarter. It’s worth mentioning that David Blood and Al Gore’s Generation Investment Management said goodbye to the biggest stake of the 750 funds followed by Insider Monkey, comprising an estimated $103.9 million in stock. Brandon Haley’s fund, Holocene Advisors, also sold off its stock, about $53.4 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 6 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Deere & Company (NYSE:DE). We will take a look at Global Payments Inc (NYSE:GPN), The Charles Schwab Corporation (NYSE:SCHW), The Progressive Corporation (NYSE:PGR), and Vale SA (NYSE:VALE). All of these stocks’ market caps are closest to DE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GPN 67 2154936 3
SCHW 62 2907493 -8
PGR 51 1505680 3
VALE 28 1111939 2
Average 52 1920012 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 52 hedge funds with bullish positions and the average amount invested in these stocks was $1920 million. That figure was $875 million in DE’s case. Global Payments Inc (NYSE:GPN) is the most popular stock in this table. On the other hand Vale SA (NYSE:VALE) is the least popular one with only 28 bullish hedge fund positions. Deere & Company (NYSE:DE) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and surpassed the market by 15.6 percentage points. Unfortunately DE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); DE investors were disappointed as the stock returned 1.8% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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