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Is Deutsche Bank Aktiengesellschaft (DB) Going to Burn These Hedge Funds?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Deutsche Bank Aktiengesellschaft (NYSE:DB) and determine whether hedge funds skillfully traded this stock.

Hedge fund interest in Deutsche Bank Aktiengesellschaft (NYSE:DB) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare DB to other stocks including BioNTech SE (NASDAQ:BNTX), Maxim Integrated Products Inc. (NASDAQ:MXIM), and CGI Inc. (NYSE:GIB) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are a lot of gauges stock traders have at their disposal to evaluate stocks. A couple of the less utilized gauges are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the best hedge fund managers can outclass the market by a healthy amount (see the details here).

Stephen Feinberg Cerberus Capital

Stephen Feinberg of Cerberus Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the new hedge fund action surrounding Deutsche Bank Aktiengesellschaft (NYSE:DB).

What have hedge funds been doing with Deutsche Bank Aktiengesellschaft (NYSE:DB)?

At Q1’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DB over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Among these funds, Hudson Executive Capital held the most valuable stake in Deutsche Bank Aktiengesellschaft (NYSE:DB), which was worth $427.1 million at the end of the third quarter. On the second spot was Cerberus Capital Management which amassed $408.5 million worth of shares. Two Sigma Advisors, Odey Asset Management Group, and Marshall Wace LLP were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Cerberus Capital Management allocated the biggest weight to Deutsche Bank Aktiengesellschaft (NYSE:DB), around 80.69% of its 13F portfolio. Hudson Executive Capital is also relatively very bullish on the stock, designating 54.07 percent of its 13F equity portfolio to DB.

Because Deutsche Bank Aktiengesellschaft (NYSE:DB) has experienced falling interest from hedge fund managers, logic holds that there lies a certain “tier” of funds that elected to cut their positions entirely by the end of the first quarter. It’s worth mentioning that Matthew Hulsizer’s PEAK6 Capital Management dropped the biggest stake of all the hedgies watched by Insider Monkey, worth close to $5.2 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also dumped its stock, about $3.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Deutsche Bank Aktiengesellschaft (NYSE:DB) but similarly valued. These stocks are BioNTech SE (NASDAQ:BNTX), Maxim Integrated Products Inc. (NASDAQ:MXIM), CGI Inc. (NYSE:GIB), and Cheniere Energy Partners LP (NYSE:CQP). This group of stocks’ market values are closest to DB’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BNTX 6 37923 2
MXIM 30 213575 -2
GIB 18 246597 -1
CQP 3 814865 -4
Average 14.25 328240 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $328 million. That figure was $916 million in DB’s case. Maxim Integrated Products Inc. (NASDAQ:MXIM) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 3 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. 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on DB as the stock returned 48.3% during the second quarter and outperformed the market by an even larger margin.

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