We can judge whether Domino’s Pizza, Inc. (NYSE:DPZ) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is Domino’s Pizza, Inc. (NYSE:DPZ) ready to rally soon? Prominent investors are getting more bullish. The number of long hedge fund bets improved by 4 recently. Our calculations also showed that DPZ 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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a gander at the new hedge fund action regarding Domino’s Pizza, Inc. (NYSE:DPZ).
What have hedge funds been doing with Domino’s Pizza, Inc. (NYSE:DPZ)?
Heading into the first quarter of 2019, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the previous quarter. By comparison, 32 hedge funds held shares or bullish call options in DPZ a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Domino’s Pizza, Inc. (NYSE:DPZ), which was worth $765.2 million at the end of the third quarter. On the second spot was Tiger Global Management LLC which amassed $464.3 million worth of shares. Moreover, Fisher Asset Management, Two Sigma Advisors, and Junto Capital Management were also bullish on Domino’s Pizza, Inc. (NYSE:DPZ), allocating a large percentage of their portfolios to this stock.
As aggregate interest increased, key hedge funds were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, established the most outsized call position in Domino’s Pizza, Inc. (NYSE:DPZ). Balyasny Asset Management had $14.9 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $8.1 million position during the quarter. The following funds were also among the new DPZ investors: Michael Kharitonov and Jon David McAuliffe’s Voleon Capital, Louis Navellier’s Navellier & Associates, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Domino’s Pizza, Inc. (NYSE:DPZ) but similarly valued. These stocks are HEICO Corporation (NYSE:HEI), Hasbro, Inc. (NASDAQ:HAS), Eastman Chemical Company (NYSE:EMN), and Tractor Supply Company (NASDAQ:TSCO). This group of stocks’ market values resemble DPZ’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HEI | 31 | 731968 | 1 |
| HAS | 19 | 254690 | -1 |
| EMN | 33 | 437187 | 8 |
| TSCO | 41 | 769921 | 7 |
| Average | 31 | 548442 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $548 million. That figure was $1860 million in DPZ’s case. Tractor Supply Company (NASDAQ:TSCO) is the most popular stock in this table. On the other hand Hasbro, Inc. (NASDAQ:HAS) is the least popular one with only 19 bullish hedge fund positions. Domino’s Pizza, Inc. (NYSE:DPZ) 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. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately DPZ wasn’t in this group. Hedge funds that bet on DPZ were disappointed as the stock lost 1.2% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
