We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards DT Midstream Inc. (NYSE:DTM).
Is DT Midstream Inc. (NYSE:DTM) the right pick for your portfolio? Investors who are in the know were taking an optimistic view. The number of long hedge fund positions rose by 22 recently. DT Midstream Inc. (NYSE:DTM) was in 22 hedge funds’ portfolios at the end of the third quarter of 2021. Our calculations also showed that DTM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now we’re going to take a look at the key hedge fund action surrounding DT Midstream Inc. (NYSE:DTM).
Do Hedge Funds Think DTM Is A Good Stock To Buy Now?
At the end of September, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22 from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in DTM a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in DT Midstream Inc. (NYSE:DTM) was held by Zimmer Partners, which reported holding $144.5 million worth of stock at the end of September. It was followed by Sessa Capital with a $133.8 million position. Other investors bullish on the company included Point72 Asset Management, Cardinal Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Sessa Capital allocated the biggest weight to DT Midstream Inc. (NYSE:DTM) , around 6.58% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, setting aside 2.27 percent of its 13F equity portfolio to DTM.
With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Sessa Capital, managed by John Petry, created the most valuable position in DT Midstream Inc. (NYSE:DTM) . Sessa Capital had $133.8 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $70.3 million investment in the stock during the quarter. The other funds with brand new DTM positions are Amy Minella’s Cardinal Capital, Ken Griffin’s Citadel Investment Group, and Frederick DiSanto’s Ancora Advisors.
Let’s go over hedge fund activity in other stocks similar to DT Midstream Inc. (NYSE:DTM) . These stocks are John Bean Technologies Corporation (NYSE:JBT), Hawaiian Electric Industries, Inc. (NYSE:HE), Sprinklr Inc. (NYSE:CXM), MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI), MSC Industrial Direct Co Inc (NYSE:MSM), Terreno Realty Corporation (NYSE:TRNO), and Umpqua Holdings Corp (NASDAQ:UMPQ). All of these stocks’ market caps are closest to DTM’s market cap.
|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 17.4 hedge funds with bullish positions and the average amount invested in these stocks was $159 million. That figure was $482 million in DTM’s case. MSC Industrial Direct Co Inc (NYSE:MSM) is the most popular stock in this table. On the other hand Sprinklr Inc. (NYSE:CXM) is the least popular one with only 11 bullish hedge fund positions. DT Midstream Inc. (NYSE:DTM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DTM is 72.9. 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately DTM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on DTM were disappointed as the stock returned 5.1% since the end of September (through 12/31) 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.
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Disclosure: None. This article was originally published at Insider Monkey.