Hedge Funds Are Betting On DraftKings Inc. (DKNG)

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 third 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 6 years and analyze what the smart money thinks of DraftKings Inc. (NASDAQ:DKNG) based on that data.

Is DraftKings Inc. (NASDAQ:DKNG) a sound stock to buy now? The smart money was taking an optimistic view. The number of bullish hedge fund bets moved up by 2 recently. DraftKings Inc. (NASDAQ:DKNG) was in 28 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 53. Our calculations also showed that DKNG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s review the fresh hedge fund action surrounding DraftKings Inc. (NASDAQ:DKNG).

Cathie Wood of ARK Investment Management

Do Hedge Funds Think DKNG Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the second quarter of 2021. By comparison, 43 hedge funds held shares or bullish call options in DKNG a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, ARK Investment Management was the largest shareholder of DraftKings Inc. (NASDAQ:DKNG), with a stake worth $844.5 million reported as of the end of September. Trailing ARK Investment Management was Citadel Investment Group, which amassed a stake valued at $225.6 million. Two Sigma Advisors, Citadel Investment Group, and Leonard Green & Partners 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 Granger Management allocated the biggest weight to DraftKings Inc. (NASDAQ:DKNG), around 8.01% of its 13F portfolio. North Fourth Asset Management is also relatively very bullish on the stock, dishing out 5.05 percent of its 13F equity portfolio to DKNG.

Now, key hedge funds have jumped into DraftKings Inc. (NASDAQ:DKNG) headfirst. Leonard Green & Partners, managed by Leonard Green, established the most valuable call position in DraftKings Inc. (NASDAQ:DKNG). Leonard Green & Partners had $62.6 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $57.8 million position during the quarter. The following funds were also among the new DKNG investors: Anthony Joseph Vaccarino’s North Fourth Asset Management, Jimmy Levin’s Sculptor Capital, and Israel Englander’s Millennium Management.

Let’s now review hedge fund activity in other stocks similar to DraftKings Inc. (NASDAQ:DKNG). These stocks are FirstEnergy Corp. (NYSE:FE), Broadridge Financial Solutions, Inc. (NYSE:BR), SK Telecom Co., Ltd. (NYSE:SKM), Halliburton Company (NYSE:HAL), M&T Bank Corporation (NYSE:MTB), Asana Inc. (NYSE:ASAN), and PG&E Corporation (NYSE:PCG). This group of stocks’ market caps are similar to DKNG’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.1 hedge funds with bullish positions and the average amount invested in these stocks was $1245 million. That figure was $1327 million in DKNG’s case. PG&E Corporation (NYSE:PCG) is the most popular stock in this table. On the other hand SK Telecom Co., Ltd. (NYSE:SKM) is the least popular one with only 6 bullish hedge fund positions. DraftKings Inc. (NASDAQ:DKNG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DKNG is 45.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and surpassed the market again by 5.1 percentage points. Unfortunately DKNG wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); DKNG investors were disappointed as the stock returned -34.7% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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