Hedge Funds Are Dumping Darden Restaurants, Inc. (DRI)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 867 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30th holdings, data that is available nowhere else. Should you consider Darden Restaurants, Inc. (NYSE:DRI) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is Darden Restaurants, Inc. (NYSE:DRI) a buy right now? The best stock pickers were selling. The number of long hedge fund bets went down by 19 in recent months. Darden Restaurants, Inc. (NYSE:DRI) was in 25 hedge funds’ portfolios at the end of September. The all time high for this statistic is 52. Our calculations also showed that DRI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 44 hedge funds in our database with DRI holdings at the end of June.

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. Keeping this in mind let’s take a gander at the new hedge fund action surrounding Darden Restaurants, Inc. (NYSE:DRI).

Ken Griffin of Citadel Investment Group

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

At the end of September, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -43% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DRI over the last 25 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.

The largest stake in Darden Restaurants, Inc. (NYSE:DRI) was held by Citadel Investment Group, which reported holding $96 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $90.6 million position. Other investors bullish on the company included Melvin Capital Management, Laurion Capital Management, and AQR Capital Management. In terms of the portfolio weights assigned to each position Beech Hill Partners allocated the biggest weight to Darden Restaurants, Inc. (NYSE:DRI), around 1.26% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, designating 1.19 percent of its 13F equity portfolio to DRI.

Seeing as Darden Restaurants, Inc. (NYSE:DRI) has experienced a decline in interest from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of fund managers that decided to sell off their entire stakes by the end of the third quarter. Interestingly, Robert Pitts’s Steadfast Capital Management dropped the biggest position of the 750 funds monitored by Insider Monkey, valued at about $223.5 million in stock. Robert Pitts’s fund, Steadfast Capital Management, also said goodbye to its stock, about $157.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 19 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Darden Restaurants, Inc. (NYSE:DRI) but similarly valued. These stocks are ON Semiconductor Corporation (NASDAQ:ON), Cheniere Energy Partners LP (NYSE:CQP), Ulta Beauty, Inc. (NASDAQ:ULTA), Trip.com Group Limited (NASDAQ:TCOM), Insulet Corporation (NASDAQ:PODD), AMC Entertainment Holdings Inc (NYSE:AMC), and DraftKings Inc. (NASDAQ:DKNG). All of these stocks’ market caps match DRI’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.4 hedge funds with bullish positions and the average amount invested in these stocks was $984 million. That figure was $337 million in DRI’s case. Ulta Beauty, Inc. (NASDAQ:ULTA) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 3 bullish hedge fund positions. Darden Restaurants, Inc. (NYSE:DRI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DRI is 28.6. 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 DRI wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); DRI investors were disappointed as the stock returned -0.6% 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.