In this article we will analyze whether Dow Inc. (NYSE:DOW) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Dow Inc. (NYSE:DOW) was in 40 hedge funds’ portfolios at the end of June. The all time high for this statistic is 47. DOW investors should be aware of a decrease in activity from the world’s largest hedge funds in recent months. There were 41 hedge funds in our database with DOW holdings at the end of March. Our calculations also showed that DOW isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to take a look at the key hedge fund action regarding Dow Inc. (NYSE:DOW).
Do Hedge Funds Think DOW Is A Good Stock To Buy Now?
At second quarter’s end, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from one quarter earlier. By comparison, 35 hedge funds held shares or bullish call options 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 $336.3 million worth of stock at the end of June. It was followed by Citadel Investment Group with a $59.7 million position. Other investors bullish on the company included Citadel Investment Group, GLG Partners, and Millennium Management. In terms of the portfolio weights assigned to each position Pzena Investment Management allocated the biggest weight to Dow Inc. (NYSE:DOW), around 1.31% of its 13F portfolio. Hourglass Capital is also relatively very bullish on the stock, dishing out 1.19 percent of its 13F equity portfolio to DOW.
Due to the fact that Dow Inc. (NYSE:DOW) has faced declining sentiment from the aggregate hedge fund industry, we can see that there is a sect of money managers who were dropping their full holdings by the end of the second quarter. Interestingly, Renaissance Technologies dumped the largest position of all the hedgies watched by Insider Monkey, valued at close to $49.5 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dropped its stock, about $48.8 million worth. These moves are important to note, as total hedge fund interest was cut by 1 funds by the end of the second quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Dow Inc. (NYSE:DOW) but similarly valued. These stocks are Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), Bilibili Inc. (NASDAQ:BILI), IQVIA Holdings, Inc. (NYSE:IQV), Walgreens Boots Alliance Inc (NASDAQ:WBA), National Grid plc (NYSE:NGG), Koninklijke Philips NV (NYSE:PHG), and Lloyds Banking Group PLC (NYSE:LYG). This group of stocks’ market valuations match DOW’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 27.6 hedge funds with bullish positions and the average amount invested in these stocks was $1068 million. That figure was $519 million in DOW’s case. IQVIA Holdings, Inc. (NYSE:IQV) is the most popular stock in this table. On the other hand National Grid plc (NYSE:NGG) is the least popular one with only 7 bullish hedge fund positions. Dow Inc. (NYSE:DOW) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DOW is 56.1. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and beat the market again by 4.4 percentage points. Unfortunately DOW wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on DOW were disappointed as the stock returned -7% since the end of June (through 10/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Dow Inc. (NYSE:DOW)
Follow Dow Inc. (NYSE:DOW)
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Disclosure: None. This article was originally published at Insider Monkey.