“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards DocuSign, Inc. (NASDAQ:DOCU).
Is DocuSign, Inc. (NASDAQ:DOCU) a cheap investment now? Investors who are in the know are becoming hopeful. The number of long hedge fund positions moved up by 11 recently. Our calculations also showed that DOCU isn’t among the 30 most popular stocks among hedge funds. DOCU was in 34 hedge funds’ portfolios at the end of March. There were 23 hedge funds in our database with DOCU holdings at the end of the previous quarter.
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 40 percentage points since May 2014 through May 30, 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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to check out the fresh hedge fund action surrounding DocuSign, Inc. (NASDAQ:DOCU).
How have hedgies been trading DocuSign, Inc. (NASDAQ:DOCU)?
At Q1’s end, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 48% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards DOCU over the last 15 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
The largest stake in DocuSign, Inc. (NASDAQ:DOCU) was held by Brookside Capital, which reported holding $158.2 million worth of stock at the end of March. It was followed by Melvin Capital Management with a $62.2 million position. Other investors bullish on the company included Hitchwood Capital Management, D E Shaw, and Echo Street Capital Management.
Now, key hedge funds have jumped into DocuSign, Inc. (NASDAQ:DOCU) headfirst. Melvin Capital Management, managed by Gabriel Plotkin, established the biggest position in DocuSign, Inc. (NASDAQ:DOCU). Melvin Capital Management had $62.2 million invested in the company at the end of the quarter. James Crichton’s Hitchwood Capital Management also initiated a $31.1 million position during the quarter. The other funds with brand new DOCU positions are D. E. Shaw’s D E Shaw, Brandon Haley’s Holocene Advisors, and David Fiszel’s Honeycomb Asset Management.
Let’s go over hedge fund activity in other stocks similar to DocuSign, Inc. (NASDAQ:DOCU). These stocks are Qorvo Inc (NASDAQ:QRVO), Zscaler, Inc. (NASDAQ:ZS), Brookfield Property Partners LP (NASDAQ:BPY), and Everest Re Group Ltd (NYSE:RE). This group of stocks’ market values match DOCU’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| QRVO | 34 | 1200686 | 6 |
| ZS | 19 | 301088 | 2 |
| BPY | 8 | 76215 | 0 |
| RE | 19 | 538369 | -8 |
| Average | 20 | 529090 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $529 million. That figure was $539 million in DOCU’s case. Qorvo Inc (NASDAQ:QRVO) is the most popular stock in this table. On the other hand Brookfield Property Partners LP (NASDAQ:BPY) is the least popular one with only 8 bullish hedge fund positions. DocuSign, Inc. (NASDAQ:DOCU) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on DOCU as the stock returned 7% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
