Were Smart Money Traders Right About Digital Realty Trust (DLR)?

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. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on Digital Realty Trust, Inc. (NYSE:DLR).

Digital Realty Trust, Inc. (NYSE:DLR) was in 26 hedge funds’ portfolios at the end of the fourth quarter of 2019. DLR has seen an increase in support from the world’s most elite money managers of late. There were 19 hedge funds in our database with DLR positions at the end of the previous quarter. Our calculations also showed that DLR 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).


Cliff Asness of AQR Capital Management

We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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 view the recent hedge fund action surrounding Digital Realty Trust, Inc. (NYSE:DLR).

How are hedge funds trading Digital Realty Trust, Inc. (NYSE:DLR)?

At the end of the fourth quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 37% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DLR over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Matthew Mark’s Jet Capital Investors has the number one call position in Digital Realty Trust, Inc. (NYSE:DLR), worth close to $38.5 million, corresponding to 7.3% of its total 13F portfolio. The second most bullish fund manager is Osterweis Capital Management, led by John Osterweis, holding a $31.2 million position; the fund has 2.2% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism encompass Ken Griffin’s Citadel Investment Group, Cliff Asness’s AQR Capital Management and Matthew Tewksbury’s Stevens Capital Management. In terms of the portfolio weights assigned to each position Jet Capital Investors allocated the biggest weight to Digital Realty Trust, Inc. (NYSE:DLR), around 7.33% of its 13F portfolio. Osterweis Capital Management is also relatively very bullish on the stock, setting aside 2.16 percent of its 13F equity portfolio to DLR.

Consequently, key money managers have jumped into Digital Realty Trust, Inc. (NYSE:DLR) headfirst. Citadel Investment Group, managed by Ken Griffin, created the biggest position in Digital Realty Trust, Inc. (NYSE:DLR). Citadel Investment Group had $29.9 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also initiated a $19.6 million position during the quarter. The other funds with new positions in the stock are Carl Tiedemann and Michael Tiedemann’s TIG Advisors, Israel Englander’s Millennium Management, and Mark Wolfson and Jamie Alexander’s Jasper Ridge Partners.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Digital Realty Trust, Inc. (NYSE:DLR) but similarly valued. We will take a look at FleetCor Technologies, Inc. (NYSE:FLT), DTE Energy Company (NYSE:DTE), McKesson Corporation (NYSE:MCK), and Twitter Inc (NYSE:TWTR). All of these stocks’ market caps are similar to DLR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FLT 44 2121544 -1
DTE 35 1090279 12
MCK 51 2268968 6
TWTR 55 1427081 0
Average 46.25 1726968 4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.25 hedge funds with bullish positions and the average amount invested in these stocks was $1727 million. That figure was $175 million in DLR’s case. Twitter Inc (NYSE:TWTR) is the most popular stock in this table. On the other hand DTE Energy Company (NYSE:DTE) is the least popular one with only 35 bullish hedge fund positions. Compared to these stocks Digital Realty Trust, Inc. (NYSE:DLR) is even less popular than DTE. Hedge funds clearly dropped the ball on DLR as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 1.0% in 2020 through May 1st but still beat the market by 12.9 percentage points. A small number of hedge funds were also right about betting on DLR as the stock returned 22.8% during the same time period and outperformed the market by an even larger margin.
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.