Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Darling International Inc. (NYSE:DAR).
Darling International Inc. (NYSE:DAR) shareholders have witnessed a decrease in hedge fund interest of late, with a net total of 6 hedge funds selling out of the stock in Q3. At the end of this article we will also compare DAR to other stocks including The Timken Company (NYSE:TKR), Mack Cali Realty Corp (NYSE:CLI), and Zendesk Inc (NYSE:ZEN) to get a better sense of its popularity.
Follow Darling Ingredients Inc. (NYSE:DAR)
Follow Darling Ingredients Inc. (NYSE:DAR)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Hedge fund activity in Darling International Inc. (NYSE:DAR)
At Q3’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 20% drop from the previous quarter, after several quarters of relatively flat ownership. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Jeffrey Gates’ Gates Capital Management has the biggest position in Darling International Inc. (NYSE:DAR), worth close to $150 million, amounting to 5.4% of its total 13F portfolio. Coming in second is Fisher Asset Management, managed by Ken Fisher, which holds a $28.5 million position. Some other professional money managers that hold long positions comprise Clint Carlson’s Carlson Capital, Mario Cibelli’s Marathon Partners and Israel Englander’s Millennium Management.
Due to the fact that Darling International Inc. (NYSE:DAR) has experienced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there exists a select few money managers who sold off their entire stakes last quarter. Interestingly, Steve Cohen’s Point72 Asset Management sold off the largest stake of all the hedgies followed by Insider Monkey, totaling close to $15.5 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dumped about $9.6 million worth of shares. These moves are important to note, as aggregate hedge fund interest dropped by 6 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Darling International Inc. (NYSE:DAR). We will take a look at The Timken Company (NYSE:TKR), Mack Cali Realty Corp (NYSE:CLI), Zendesk Inc (NYSE:ZEN), and Cirrus Logic, Inc. (NASDAQ:CRUS). This group of stocks’ market caps are closest to DAR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TKR | 27 | 136824 | 1 |
| CLI | 10 | 114408 | -2 |
| ZEN | 26 | 308682 | -1 |
| CRUS | 28 | 204275 | 1 |
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $191 million. That figure was $291 million in DAR’s case. Cirrus Logic, Inc. (NASDAQ:CRUS) is the most popular stock in this table. On the other hand Mack Cali Realty Corp (NYSE:CLI) is the least popular one with only 10 bullish hedge fund positions. Darling International 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 CRUS might be a better candidate to consider for a long position.
Disclosure: None
