Were Hedge Funds Right About Souring On Dollar Tree, Inc. (DLTR)?

The latest 13F reporting period has come and gone, and 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. Now, 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 you are going to find out whether hedge funds thoughtDollar Tree, Inc. (NASDAQ:DLTR) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is Dollar Tree, Inc. (NASDAQ:DLTR) going to take off soon? The best stock pickers were selling. The number of long hedge fund bets shrunk by 9 lately. Our calculations also showed that DLTR 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). DLTR was in 42 hedge funds’ portfolios at the end of March. There were 51 hedge funds in our database with DLTR positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

To most stock holders, hedge funds are viewed as worthless, outdated financial vehicles of the past. While there are greater than 8000 funds with their doors open at present, Our researchers look at the crème de la crème of this group, about 850 funds. Most estimates calculate that this group of people handle the majority of all hedge funds’ total capital, and by shadowing their finest stock picks, Insider Monkey has formulated many investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy surpassed 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 .

Ryan Frick Dorsal Capital

Ryan Frick of Dorsal Capital

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. Keeping this in mind we’re going to check out the new hedge fund action encompassing Dollar Tree, Inc. (NASDAQ:DLTR).

What have hedge funds been doing with Dollar Tree, Inc. (NASDAQ:DLTR)?

Heading into the second quarter of 2020, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DLTR 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, Akre Capital Management held the most valuable stake in Dollar Tree, Inc. (NASDAQ:DLTR), which was worth $334.5 million at the end of the third quarter. On the second spot was Rivulet Capital which amassed $203.9 million worth of shares. Palestra Capital Management, D E Shaw, and Citadel Investment Group 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 Rivulet Capital allocated the biggest weight to Dollar Tree, Inc. (NASDAQ:DLTR), around 13.05% of its 13F portfolio. BlueDrive Global Investors is also relatively very bullish on the stock, earmarking 10.5 percent of its 13F equity portfolio to DLTR.

Since Dollar Tree, Inc. (NASDAQ:DLTR) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of hedge funds who were dropping their entire stakes by the end of the first quarter. Interestingly, Steve Cohen’s Point72 Asset Management cut the largest investment of all the hedgies watched by Insider Monkey, comprising close to $99 million in stock. Will Cook’s fund, Sunriver Management, also cut its stock, about $35.3 million worth. These moves are important to note, as total hedge fund interest fell by 9 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks similar to Dollar Tree, Inc. (NASDAQ:DLTR). These stocks are Citrix Systems, Inc. (NASDAQ:CTXS), Alexandria Real Estate Equities Inc (NYSE:ARE), TransDigm Group Incorporated (NYSE:TDG), and The Williams Companies, Inc. (NYSE:WMB). This group of stocks’ market caps are closest to DLTR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CTXS 38 1418404 4
ARE 29 196351 8
TDG 58 3800759 -5
WMB 47 552828 7
Average 43 1492086 3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 43 hedge funds with bullish positions and the average amount invested in these stocks was $1492 million. That figure was $1354 million in DLTR’s case. TransDigm Group Incorporated (NYSE:TDG) is the most popular stock in this table. On the other hand Alexandria Real Estate Equities Inc (NYSE:ARE) is the least popular one with only 29 bullish hedge fund positions. Dollar Tree, Inc. (NASDAQ:DLTR) 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 DLTR as the stock returned 26.1% 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.