While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding DXC Technology Company (NYSE:DXC).
Is DXC a good stock to buy? DXC Technology Company (NYSE:DXC) shareholders have witnessed a decrease in hedge fund interest recently. DXC Technology Company (NYSE:DXC) was in 37 hedge funds’ portfolios at the end of September. The all time high for this statistic is 60. Our calculations also showed that DXC 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.
According to most investors, hedge funds are viewed as underperforming, outdated financial vehicles of years past. While there are more than 8000 funds in operation at present, Our experts look at the masters of this group, about 850 funds. Most estimates calculate that this group of people orchestrate most of the smart money’s total capital, and by keeping track of their best equity investments, Insider Monkey has formulated various investment strategies that have historically exceeded the market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
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 under the radar cannabis 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. Keeping this in mind let’s view the key hedge fund action regarding DXC Technology Company (NYSE:DXC).
Do Hedge Funds Think DXC Is A Good Stock To Buy Now?
At the end of September, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. On the other hand, there were a total of 41 hedge funds with a bullish position in DXC 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 DXC Technology Company (NYSE:DXC) was held by Glenview Capital, which reported holding $182.4 million worth of stock at the end of September. It was followed by Miller Value Partners with a $96.3 million position. Other investors bullish on the company included Arrowstreet Capital, Maverick Capital, and Atlantic Investment Management. In terms of the portfolio weights assigned to each position Atlantic Investment Management allocated the biggest weight to DXC Technology Company (NYSE:DXC), around 16.97% of its 13F portfolio. Glenview Capital is also relatively very bullish on the stock, dishing out 5.73 percent of its 13F equity portfolio to DXC.
Seeing as DXC Technology Company (NYSE:DXC) has witnessed a decline in interest from the smart money, we can see that there lies a certain “tier” of funds that decided to sell off their positions entirely in the third quarter. Interestingly, John Smith Clark’s Southpoint Capital Advisors dumped the biggest stake of all the hedgies tracked by Insider Monkey, comprising about $7.4 million in stock. Mike Vranos’s fund, Ellington, also cut its stock, about $1.4 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 3 funds in the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as DXC Technology Company (NYSE:DXC) but similarly valued. We will take a look at Alaska Air Group, Inc. (NYSE:ALK), Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (NYSE:PAC), Appian Corporation (NASDAQ:APPN), Freshpet Inc (NASDAQ:FRPT), MDU Resources Group Inc (NYSE:MDU), SmileDirectClub, Inc. (NASDAQ:SDC), and United Therapeutics Corporation (NASDAQ:UTHR). All of these stocks’ market caps match DXC’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 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $376 million. That figure was $618 million in DXC’s case. Alaska Air Group, Inc. (NYSE:ALK) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (NYSE:PAC) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks DXC Technology Company (NYSE:DXC) is more popular among hedge funds. Our overall hedge fund sentiment score for DXC is 70.5. 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 returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on DXC as the stock returned 29.4% since the end of September (through 12/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.