Is DT A Good Stock To Buy Now?

With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Dynatrace, Inc. (NYSE:DT).

Is DT a good stock to buy now? Dynatrace, Inc. (NYSE:DT) was in 46 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 41. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. DT investors should be aware of an increase in hedge fund interest recently. There were 41 hedge funds in our database with DT positions at the end of the second quarter. Our calculations also showed that DT 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Daniel Sundheim D1 Capital

Daniel Sundheim of D1 Capital Partners

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 review the latest hedge fund action encompassing Dynatrace, Inc. (NYSE:DT).

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

Heading into the fourth quarter of 2020, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in DT 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.

Is DT A Good Stock To Buy?

More specifically, Coatue Management was the largest shareholder of Dynatrace, Inc. (NYSE:DT), with a stake worth $270.8 million reported as of the end of September. Trailing Coatue Management was D1 Capital Partners, which amassed a stake valued at $241.1 million. SRS Investment Management, Citadel Investment Group, and Shannon River Fund Management 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 Shannon River Fund Management allocated the biggest weight to Dynatrace, Inc. (NYSE:DT), around 10.41% of its 13F portfolio. Cowbird Capital is also relatively very bullish on the stock, dishing out 9.78 percent of its 13F equity portfolio to DT.

Consequently, key hedge funds were breaking ground themselves. D1 Capital Partners, managed by Daniel Sundheim, initiated the largest position in Dynatrace, Inc. (NYSE:DT). D1 Capital Partners had $241.1 million invested in the company at the end of the quarter. Karthik Sarma’s SRS Investment Management also made a $163.1 million investment in the stock during the quarter. The other funds with new positions in the stock are David Goel and Paul Ferri’s Matrix Capital Management, Scott Coulter’s Cowbird Capital, and Ryan Frick and Oliver Evans’s Dorsal Capital Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Dynatrace, Inc. (NYSE:DT) but similarly valued. We will take a look at Evergy, Inc. (NYSE:EVRG), Open Text Corporation (NASDAQ:OTEX), Whirlpool Corporation (NYSE:WHR), Teledyne Technologies Incorporated (NYSE:TDY), Booz Allen Hamilton Holding Corporation (NYSE:BAH), Autohome Inc (NYSE:ATHM), and Natura &Co Holding S.A. (NYSE:NTCO). This group of stocks’ market valuations match DT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EVRG 37 763391 -3
OTEX 19 160355 1
WHR 28 1212823 2
TDY 31 343280 -3
BAH 31 266718 6
ATHM 17 909095 -7
NTCO 4 98196 -1
Average 23.9 536265 -0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.9 hedge funds with bullish positions and the average amount invested in these stocks was $536 million. That figure was $1524 million in DT’s case. Evergy, Inc. (NYSE:EVRG) is the most popular stock in this table. On the other hand Natura &Co Holding S.A. (NYSE:NTCO) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Dynatrace, Inc. (NYSE:DT) is more popular among hedge funds. Our overall hedge fund sentiment score for DT is 90. 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. Unfortunately DT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on DT were disappointed as the stock returned -0.6% since the end of the third quarter (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.