The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 817 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th, about a month before the elections. In this article we look at what those investors think of Dow Inc. (NYSE:DOW).
Is DOW a good stock to buy now? Hedge funds were getting more optimistic. The number of long hedge fund bets moved up by 7 recently. Dow Inc. (NYSE:DOW) was in 42 hedge funds’ portfolios at the end of September. The all time high for this statistic is 38. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that DOW 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).
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 cannabis tech 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 let’s go over the new hedge fund action regarding Dow Inc. (NYSE:DOW).
Do Hedge Funds Think DOW Is A Good Stock To Buy Now?
At the end of September, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the previous quarter. On the other hand, there were a total of 37 hedge funds with a bullish position in DOW a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Dow Inc. (NYSE:DOW) was held by Pzena Investment Management, which reported holding $271 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $101.1 million position. Other investors bullish on the company included Citadel Investment Group, Balyasny Asset Management, and Appian Way Asset Management. In terms of the portfolio weights assigned to each position Appian Way Asset Management allocated the biggest weight to Dow Inc. (NYSE:DOW), around 12.47% of its 13F portfolio. Cobalt Capital Management is also relatively very bullish on the stock, dishing out 3.26 percent of its 13F equity portfolio to DOW.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, created the largest position in Dow Inc. (NYSE:DOW). Balyasny Asset Management had $30.2 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also initiated a $10.2 million position during the quarter. The following funds were also among the new DOW investors: Wayne Cooperman’s Cobalt Capital Management, Michael Gelband’s ExodusPoint Capital, and Jinghua Yan’s TwinBeech Capital.
Let’s also examine hedge fund activity in other stocks similar to Dow Inc. (NYSE:DOW). These stocks are NXP Semiconductors NV (NASDAQ:NXPI), Exelon Corporation (NASDAQ:EXC), Chipotle Mexican Grill, Inc. (NYSE:CMG), Enterprise Products Partners L.P. (NYSE:EPD), Sempra Energy (NYSE:SRE), O’Reilly Automotive Inc (NASDAQ:ORLY), and Seagen Inc. (NASDAQ:SGEN). This group of stocks’ market values match DOW’s market value.
|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 42.4 hedge funds with bullish positions and the average amount invested in these stocks was $2778 million. That figure was $512 million in DOW’s case. NXP Semiconductors NV (NASDAQ:NXPI) is the most popular stock in this table. On the other hand Seagen Inc. (NASDAQ:SGEN) is the least popular one with only 28 bullish hedge fund positions. Dow Inc. (NYSE:DOW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DOW is 57.5. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on DOW as the stock returned 17.4% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.