Is DAR Stock A Buy or Sell?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Darling Ingredients Inc. (NYSE:DAR) to find out whether there were any major changes in hedge funds’ views.

Is DAR stock a buy? Prominent investors were buying. The number of bullish hedge fund bets advanced by 5 in recent months. Darling Ingredients Inc. (NYSE:DAR) was in 36 hedge funds’ portfolios at the end of December. The all time high for this statistic is 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that DAR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 31 hedge funds in our database with DAR holdings at the end of September.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Clint Carlson of Carlson Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to take a look at the key hedge fund action encompassing Darling Ingredients Inc. (NYSE:DAR).

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

At fourth quarter’s end, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards DAR over the last 22 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

The largest stake in Darling Ingredients Inc. (NYSE:DAR) was held by Impax Asset Management, which reported holding $192.3 million worth of stock at the end of December. It was followed by Fisher Asset Management with a $102.2 million position. Other investors bullish on the company included Point State Capital, Marshall Wace LLP, and Lansdowne Partners. In terms of the portfolio weights assigned to each position Brightline Capital allocated the biggest weight to Darling Ingredients Inc. (NYSE:DAR), around 13.06% of its 13F portfolio. Parsifal Capital Management is also relatively very bullish on the stock, designating 4.04 percent of its 13F equity portfolio to DAR.

Consequently, some big names have been driving this bullishness. Point State Capital, managed by Zach Schreiber, created the most outsized position in Darling Ingredients Inc. (NYSE:DAR). Point State Capital had $40.9 million invested in the company at the end of the quarter. George McCabe’s Portolan Capital Management also made a $17 million investment in the stock during the quarter. The other funds with new positions in the stock are Vince Maddi and Shawn Brennan’s SIR Capital Management, Todd J. Kantor’s Encompass Capital Advisors, and Clint Carlson’s Carlson Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Darling Ingredients Inc. (NYSE:DAR) but similarly valued. We will take a look at New Fortress Energy LLC (NASDAQ:NFE), Amdocs Limited (NYSE:DOX), Weibo Corp (NASDAQ:WB), Snap-on Incorporated (NYSE:SNA), Kinross Gold Corporation (NYSE:KGC), Canopy Growth Corporation (NYSE:CGC), and Jazz Pharmaceuticals Plc (NASDAQ:JAZZ). This group of stocks’ market valuations are closest to DAR’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $449 million. That figure was $668 million in DAR’s case. Kinross Gold Corporation (NYSE:KGC) is the most popular stock in this table. On the other hand New Fortress Energy LLC (NASDAQ:NFE) is the least popular one with only 11 bullish hedge fund positions. Darling Ingredients Inc. (NYSE:DAR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DAR is 90. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Hedge funds were also right about betting on DAR as the stock returned 27.3% since the end of Q4 (through 4/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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