Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved, lost a third of its value since the end of July. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 S&P 500 stocks among hedge funds at the end of September 2018 yielded an average return of 6.7% year-to-date, vs. a gain of 2.6% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Darling Ingredients Inc. (NYSE:DAR).
Darling Ingredients Inc. (NYSE:DAR) investors should be aware of an increase in hedge fund sentiment lately. Our calculations also showed that dar isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let’s take a glance at the new hedge fund action regarding Darling Ingredients Inc. (NYSE:DAR).
What does the smart money think about Darling Ingredients Inc. (NYSE:DAR)?
At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DAR over the last 13 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Brenner West Capital Partners held the most valuable stake in Darling Ingredients Inc. (NYSE:DAR), which was worth $66.2 million at the end of the third quarter. On the second spot was Point72 Asset Management which amassed $51.8 million worth of shares. Moreover, Fisher Asset Management, Impax Asset Management, and GMT Capital were also bullish on Darling Ingredients Inc. (NYSE:DAR), allocating a large percentage of their portfolios to this stock.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Hawk Ridge Management, managed by David Brown, created the most outsized position in Darling Ingredients Inc. (NYSE:DAR). Hawk Ridge Management had $5.2 million invested in the company at the end of the quarter. Ken Grossman and Glen Schneider’s SG Capital Management also initiated a $4 million position during the quarter. The other funds with brand new DAR positions are Till Bechtolsheimer’s Arosa Capital Management, Michael Platt and William Reeves’s BlueCrest Capital Mgmt., and Frederick DiSanto’s Ancora Advisors.
Let’s now review hedge fund activity in other stocks similar to Darling Ingredients Inc. (NYSE:DAR). These stocks are Ocean Rig UDW Inc (NASDAQ:ORIG), Greif, Inc. (NYSE:GEF), Antero Midstream GP LP (NYSE:AMGP), and Companhia Siderurgica Nacional (NYSE:SID). All of these stocks’ market caps match DAR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ORIG | 28 | 1808393 | 1 |
| GEF | 19 | 137228 | -1 |
| AMGP | 17 | 171786 | 6 |
| SID | 7 | 2815 | 0 |
| Average | 17.75 | 530056 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $530 million. That figure was $306 million in DAR’s case. Ocean Rig UDW Inc (NASDAQ:ORIG) is the most popular stock in this table. On the other hand Companhia Siderurgica Nacional (NYSE:SID) is the least popular one with only 7 bullish hedge fund positions. Darling Ingredients Inc. (NYSE:DAR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ORIG might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
