The equity market returns were very disappointing in the third quarter, “thanks” to the slowdown of China’s economy and the weaker-than-expected U.S. economic data. It was not entirely clear whether the broader market sell-off made U.S. equity valuations undervalued, but it definitely made them more attractive. It is worth mentioning that Russell 2000 ETF (IWM) underperformed the broad-market S&P 500 ETF by more than 14 percentage points during the period of June 25, 2015 through October 30, 2015. This clearly points to the fact that most investors, including hedge fund firms and institutional investors, heavily cut their exposure to high-potential (but seemingly riskier) small-cap stocks during the bloody third quarter. So let’s take a glance at the smart money sentiment towards Dover Corp (NYSE:DOV) and see how it was affected.
Dover Corp (NYSE:DOV) was in 25 hedge funds’ portfolios at the end of the third quarter of 2015. DOV investors should be aware of a decrease in hedge fund interest recently. There were 26 hedge funds in our database with DOV positions at the end of the previous quarter. At the end of this article we will also compare DOV to other stocks including First Republic Bank (NYSE:FRC), UDR, Inc. (NYSE:UDR), and Expeditors International of Washington (NASDAQ:EXPD) to get a better sense of its popularity.
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At the moment there are a large number of signals stock market investors have at their disposal to appraise their holdings. A couple of the most under-the-radar signals are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the best investment managers can beat their index-focused peers by a healthy amount (see the details here).
Now, we’re going to analyze the key action regarding Dover Corp (NYSE:DOV).
How have hedgies been trading Dover Corp (NYSE:DOV)?
At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Gates Capital Management, managed by Jeffrey Gates, holds the largest position in Dover Corp (NYSE:DOV). Gates Capital Management has an $155 million position in the stock, comprising 6% of its 13F portfolio. On Gates Capital Management’s heels is Richard S. Pzena of Pzena Investment Management, with an $129.1 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions include Joel Greenblatt’s Gotham Asset Management, David Harding’s Winton Capital Management and Cliff Asness’s AQR Capital Management.
Due to the fact that Dover Corp (NYSE:DOV) has experienced declining sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of hedgies that elected to cut their full holdings last quarter. Intriguingly, Matthew Tewksbury’s Stevens Capital Management sold off the biggest position of all the hedgies followed by Insider Monkey, valued at about $5.9 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund dumped about $3.2 million worth. These transactions are important to note, as total hedge fund interest fell by 1 fund last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Dover Corp (NYSE:DOV) but similarly valued. We will take a look at First Republic Bank (NYSE:FRC), UDR, Inc. (NYSE:UDR), Expeditors International of Washington (NASDAQ:EXPD), and Cheniere Energy Partners LP (NYSEMKT:CQP). This group of stocks’ market values are similar to DOV’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FRC | 17 | 362242 | -7 |
| UDR | 9 | 45140 | -3 |
| EXPD | 25 | 731428 | -6 |
| CQP | 8 | 30292 | 1 |
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $292 million. That figure was $430 million in DOV’s case. Expeditors International of Washington (NASDAQ:EXPD) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSEAMEX:CQP) is the least popular one with only 8 bullish hedge fund positions. Dover Corp (NYSE:DOV) 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 focusing on stocks that hedge funds are collective most bullish on. In this regard, EXPD might be a better alternative.
