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Were Hedge Funds Right About DuPont de Nemours Inc (DD)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded DuPont de Nemours Inc (NYSE:DD) and determine whether the smart money was really smart about this stock.

DuPont de Nemours Inc (NYSE:DD) was in 54 hedge funds’ portfolios at the end of the first quarter of 2020. DD investors should be aware of a decrease in activity from the world’s largest hedge funds recently. There were 68 hedge funds in our database with DD holdings at the end of the previous quarter. Our calculations also showed that DD isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Mason Hawkins of Southeastern Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the fresh hedge fund action encompassing DuPont de Nemours Inc (NYSE:DD).

What have hedge funds been doing with DuPont de Nemours Inc (NYSE:DD)?

At the end of the first quarter, a total of 54 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DD over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, David S. Winter and David J. Millstone’s 40 North Management has the number one position in DuPont de Nemours Inc (NYSE:DD), worth close to $676.2 million, amounting to 41.2% of its total 13F portfolio. Coming in second is Maverick Capital, led by Lee Ainslie, holding a $346.6 million position; 7.3% of its 13F portfolio is allocated to the stock. Other peers with similar optimism include D. E. Shaw’s D E Shaw, Mason Hawkins’s Southeastern Asset Management and Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC. In terms of the portfolio weights assigned to each position 40 North Management allocated the biggest weight to DuPont de Nemours Inc (NYSE:DD), around 41.16% of its 13F portfolio. Madison Avenue Partners is also relatively very bullish on the stock, setting aside 14.84 percent of its 13F equity portfolio to DD.

Due to the fact that DuPont de Nemours Inc (NYSE:DD) has witnessed falling interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few fund managers that slashed their full holdings in the first quarter. It’s worth mentioning that Aaron Cowen’s Suvretta Capital Management said goodbye to the largest investment of the “upper crust” of funds watched by Insider Monkey, valued at close to $68.7 million in stock. Leon Cooperman’s fund, Omega Advisors, also cut its stock, about $50.9 million worth. These transactions are interesting, as total hedge fund interest dropped by 14 funds in the first quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as DuPont de Nemours Inc (NYSE:DD) but similarly valued. We will take a look at Hormel Foods Corporation (NYSE:HRL), HP Inc. (NYSE:HPQ), Alcon Inc. (NYSE:ALC), and AFLAC Incorporated (NYSE:AFL). This group of stocks’ market values match DD’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HRL 28 276267 5
HPQ 43 2180945 -6
ALC 25 605394 1
AFL 32 387153 0
Average 32 862440 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $862 million. That figure was $2412 million in DD’s case. HP Inc. (NYSE:HPQ) is the most popular stock in this table. On the other hand Alcon Inc. (NYSE:ALC) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks DuPont de Nemours Inc (NYSE:DD) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on DD as the stock returned 56.8% in Q2 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.