Is DOW Stock A Buy or Sell?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Dow Inc. (NYSE:DOW), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is DOW stock a buy or sell? Dow Inc. (NYSE:DOW) investors should be aware of an increase in hedge fund interest of late. Dow Inc. (NYSE:DOW) was in 47 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 42. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 42 hedge funds in our database with DOW holdings at the end of September. Our calculations also showed that DOW isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

At the moment there are a large number of methods market participants use to grade stocks. A couple of the most under-the-radar methods are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the top hedge fund managers can outpace the market by a significant margin (see the details here).

Rick Gerson

Richard Gerson of Falcon Edge Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock 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 (or at the end of this article).Now we’re going to take a look at the new hedge fund action surrounding Dow Inc. (NYSE:DOW).

Do Hedge Funds Think DOW Is A Good Stock To Buy Now?

At Q4’s end, a total of 47 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from the third quarter of 2020. On the other hand, there were a total of 34 hedge funds with a bullish position in DOW a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

The largest stake in Dow Inc. (NYSE:DOW) was held by Pzena Investment Management, which reported holding $300.7 million worth of stock at the end of December. It was followed by Millennium Management with a $77.8 million position. Other investors bullish on the company included Arrowstreet Capital, Renaissance Technologies, and Falcon Edge Capital. In terms of the portfolio weights assigned to each position Albar Capital allocated the biggest weight to Dow Inc. (NYSE:DOW), around 9.21% of its 13F portfolio. Falcon Edge Capital is also relatively very bullish on the stock, earmarking 2 percent of its 13F equity portfolio to DOW.

As one would reasonably expect, key money managers have been driving this bullishness. Renaissance Technologies, assembled the most valuable position in Dow Inc. (NYSE:DOW). Renaissance Technologies had $50.1 million invested in the company at the end of the quarter. Richard Gerson and Navroz D. Udwadia’s Falcon Edge Capital also initiated a $34.1 million position during the quarter. The other funds with new positions in the stock are Javier Velazquez’s Albar Capital, Louis Bacon’s Moore Global Investments, and Robert Bishop’s Impala Asset Management.

Let’s check out hedge fund activity in other stocks similar to Dow Inc. (NYSE:DOW). These stocks are Carvana Co. (NYSE:CVNA), Baxter International Inc. (NYSE:BAX), CNOOC Limited (NYSE:CEO), Pinterest, Inc. (NYSE:PINS), Thomson Reuters Corporation (NYSE:TRI), Barrick Gold Corporation (NYSE:GOLD), and Public Storage (NYSE:PSA). This group of stocks’ market valuations are closest to DOW’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CVNA 63 7071672 10
BAX 42 2801959 -9
CEO 13 197301 -1
PINS 95 5840185 15
TRI 23 360755 4
GOLD 53 1751874 1
PSA 31 1038430 14
Average 45.7 2723168 4.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 45.7 hedge funds with bullish positions and the average amount invested in these stocks was $2723 million. That figure was $711 million in DOW’s case. Pinterest, Inc. (NYSE:PINS) is the most popular stock in this table. On the other hand CNOOC Limited (NYSE:CEO) is the least popular one with only 13 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 60.7. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on DOW as the stock returned 16.4% since the end of Q4 (through 3/19) 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.