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

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about DuPont de Nemours Inc (NYSE:DD) in this article.

DuPont de Nemours Inc (NYSE:DD) was in 68 hedge funds’ portfolios at the end of December. DD has experienced an increase in enthusiasm from smart money recently. There were 52 hedge funds in our database with DD positions 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 Q4 rankings and see the video at the end of this article for Q3 rankings).

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 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.

David Winters

David S. Winter of 40 North Management

We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video. if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to go over the key hedge fund action surrounding DuPont de Nemours Inc (NYSE:DD).

How have hedgies been trading DuPont de Nemours Inc (NYSE:DD)?

Heading into the first quarter of 2020, a total of 68 of the hedge funds tracked by Insider Monkey were long this stock, a change of 31% 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 find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Maverick Capital held the most valuable stake in DuPont de Nemours Inc (NYSE:DD), which was worth $458.6 million at the end of the third quarter. On the second spot was D E Shaw which amassed $310.9 million worth of shares. Citadel Investment Group, Adage Capital Management, and Levin Easterly Partners 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 Bodenholm Capital allocated the biggest weight to DuPont de Nemours Inc (NYSE:DD), around 43.15% of its 13F portfolio. 40 North Management is also relatively very bullish on the stock, earmarking 10.09 percent of its 13F equity portfolio to DD.

Now, specific money managers were leading the bulls’ herd. 40 North Management, managed by David S. Winter and David J. Millstone, created the most valuable position in DuPont de Nemours Inc (NYSE:DD). 40 North Management had $142.8 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $111.1 million investment in the stock during the quarter. The following funds were also among the new DD investors: Aaron Cowen’s Suvretta Capital Management, David Rosen’s Rubric Capital Management, and Daniel Lascano’s Lomas Capital Management.

Let’s also examine 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 Kimberly Clark Corporation (NYSE:KMB), ING Groep N.V. (NYSE:ING), Metlife Inc (NYSE:MET), and American Electric Power Company, Inc. (NYSE:AEP). All of these stocks’ market caps are similar to DD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KMB 37 1058671 -5
ING 14 635357 4
MET 38 2371511 -1
AEP 34 1687802 -1
Average 30.75 1438335 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $1438 million. That figure was $2372 million in DD’s case. Metlife Inc (NYSE:MET) is the most popular stock in this table. On the other hand ING Groep N.V. (NYSE:ING) is the least popular one with only 14 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 lost 1.0% in 2020 through April 20th and still beat the market by 11 percentage points. Unfortunately DD wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on DD were disappointed as the stock returned -37.7% during the three months of 2020 (through April 20th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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