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Were Hedge Funds Right About Souring On Dell Technologies Inc. (DELL)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Dell Technologies Inc. (NYSE:DELL) based on that data and determine whether they were really smart about the stock.

Dell Technologies Inc. (NYSE:DELL) investors should be aware of a decrease in activity from the world’s largest hedge funds recently. Our calculations also showed that DELL 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.

If you’d ask most stock holders, hedge funds are perceived as underperforming, outdated investment vehicles of the past. While there are more than 8000 funds with their doors open at present, We hone in on the crème de la crème of this club, around 850 funds. These hedge fund managers control the majority of the hedge fund industry’s total asset base, and by paying attention to their top equity investments, Insider Monkey has unearthed a number of investment strategies that have historically defeated the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Jeffrey Tannenbaum of Fir Tree

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. With all of this in mind we’re going to view the new hedge fund action surrounding Dell Technologies Inc. (NYSE:DELL).

Hedge fund activity in Dell Technologies Inc. (NYSE:DELL)

Heading into the second quarter of 2020, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DELL over the last 18 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Paul Singer’s Elliott Management has the biggest position in Dell Technologies Inc. (NYSE:DELL), worth close to $591.5 million, corresponding to 11% of its total 13F portfolio. Sitting at the No. 2 spot is Canyon Capital Advisors, led by Joshua Friedman and Mitchell Julis, holding a $335.2 million position; 11.8% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions include Andrew Wellington and Jeff Keswin’s Lyrical Asset Management, and Anthony Bozza’s Lakewood Capital Management. In terms of the portfolio weights assigned to each position HighVista Strategies allocated the biggest weight to Dell Technologies Inc. (NYSE:DELL), around 24.93% of its 13F portfolio. Canyon Capital Advisors is also relatively very bullish on the stock, setting aside 11.84 percent of its 13F equity portfolio to DELL.

Seeing as Dell Technologies Inc. (NYSE:DELL) has witnessed a decline in interest from hedge fund managers, it’s easy to see that there was a specific group of money managers that elected to cut their full holdings by the end of the first quarter. At the top of the heap, David Rosen’s Rubric Capital Management dumped the biggest stake of the “upper crust” of funds followed by Insider Monkey, totaling about $43.7 million in stock. Ken Griffin’s fund, Citadel Investment Group, also dumped its stock, about $29.8 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 2 funds by the end of the first quarter.

Let’s check out hedge fund activity in other stocks similar to Dell Technologies Inc. (NYSE:DELL). These stocks are Emerson Electric Co. (NYSE:EMR), The Allstate Corporation (NYSE:ALL), Electronic Arts Inc. (NASDAQ:EA), and Metlife Inc (NYSE:MET). All of these stocks’ market caps are similar to DELL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EMR 33 434014 -8
ALL 43 1535993 6
EA 73 1987020 5
MET 34 1018231 -4
Average 45.75 1243815 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 45.75 hedge funds with bullish positions and the average amount invested in these stocks was $1244 million. That figure was $1968 million in DELL’s case. Electronic Arts Inc. (NASDAQ:EA) is the most popular stock in this table. On the other hand Emerson Electric Co. (NYSE:EMR) is the least popular one with only 33 bullish hedge fund positions. Dell Technologies Inc. (NYSE:DELL) is not the least popular stock in this group but hedge fund interest is still below average. 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 gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on DELL as the stock returned 38.9% during the second quarter and outperformed the market by an even larger margin.

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