Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Dover Corporation (NYSE:DOV) based on that data.
Is DOV a good stock to buy now? Dover Corporation (NYSE:DOV) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 40 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that DOV isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Avangrid, Inc. (NYSE:AGR), SS&C Technologies Holdings, Inc. (NASDAQ:SSNC), and FirstEnergy Corp. (NYSE:FE) to gather more data points.
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to take a peek at the latest hedge fund action surrounding Dover Corporation (NYSE:DOV).
Do Hedge Funds Think DOV Is A Good Stock To Buy Now?
At Q3’s end, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DOV over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in Dover Corporation (NYSE:DOV), which was worth $156.4 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $116 million worth of shares. D E Shaw, Millennium Management, and Holocene Advisors 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 Thames Capital Management allocated the biggest weight to Dover Corporation (NYSE:DOV), around 0.88% of its 13F portfolio. Scopus Asset Management is also relatively very bullish on the stock, dishing out 0.61 percent of its 13F equity portfolio to DOV.
Since Dover Corporation (NYSE:DOV) has faced bearish sentiment from the smart money, we can see that there lies a certain “tier” of money managers who sold off their full holdings heading into Q4. It’s worth mentioning that Anand Parekh’s Alyeska Investment Group said goodbye to the largest stake of the “upper crust” of funds followed by Insider Monkey, worth close to $13.1 million in stock. Till Bechtolsheimer’s fund, Arosa Capital Management, also cut its stock, about $6.6 million worth. These transactions are important to note, 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 Dover Corporation (NYSE:DOV) but similarly valued. These stocks are Avangrid, Inc. (NYSE:AGR), SS&C Technologies Holdings, Inc. (NASDAQ:SSNC), FirstEnergy Corp. (NYSE:FE), Insulet Corporation (NASDAQ:PODD), Etsy Inc (NASDAQ:ETSY), Quest Diagnostics Incorporated (NYSE:DGX), and Slack Technologies Inc (NYSE:WORK). This group of stocks’ market valuations match DOV’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 39.3 hedge funds with bullish positions and the average amount invested in these stocks was $1038 million. That figure was $687 million in DOV’s case. FirstEnergy Corp. (NYSE:FE) is the most popular stock in this table. On the other hand Avangrid, Inc. (NYSE:AGR) is the least popular one with only 11 bullish hedge fund positions. Dover Corporation (NYSE:DOV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DOV is 65.2. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on DOV as the stock returned 11.3% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.