Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Darling Ingredients Inc. (NYSE:DAR).
Is Darling Ingredients Inc. (NYSE:DAR) a buy, sell, or hold? Prominent investors are betting on the stock. The number of bullish hedge fund bets rose by 8 lately. Our calculations also showed that DAR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Jeffrey Ubben of ValueAct Capital
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the key hedge fund action surrounding Darling Ingredients Inc. (NYSE:DAR).
What have hedge funds been doing with Darling Ingredients Inc. (NYSE:DAR)?
At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the second quarter of 2019. By comparison, 19 hedge funds held shares or bullish call options in DAR a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Among these funds, Impax Asset Management held the most valuable stake in Darling Ingredients Inc. (NYSE:DAR), which was worth $47.1 million at the end of the third quarter. On the second spot was ValueAct Capital which amassed $42.9 million worth of shares. Fisher Asset Management, Millennium Management, and Point72 Asset Management 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 Inherent Group allocated the biggest weight to Darling Ingredients Inc. (NYSE:DAR), around 11.81% of its 13F portfolio. Empirical Capital Partners is also relatively very bullish on the stock, earmarking 2.61 percent of its 13F equity portfolio to DAR.
Now, key money managers were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the largest position in Darling Ingredients Inc. (NYSE:DAR). Balyasny Asset Management had $10.5 million invested in the company at the end of the quarter. Jonathan Barrett and Paul Segal’s Luminus Management also initiated a $4.1 million position during the quarter. The other funds with new positions in the stock are David E. Shaw’s D E Shaw, Ken Griffin’s Citadel Investment Group, and Cristan Blackman’s Empirical Capital Partners.
Let’s check out hedge fund activity in other stocks similar to Darling Ingredients Inc. (NYSE:DAR). We will take a look at Investors Bancorp, Inc. (NASDAQ:ISBC), Paramount Group Inc (NYSE:PGRE), Cantel Medical Corp. (NYSE:CMD), and Virtu Financial Inc (NASDAQ:VIRT). This group of stocks’ market valuations match DAR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ISBC | 26 | 585162 | 3 |
| PGRE | 18 | 293248 | 5 |
| CMD | 11 | 149052 | 0 |
| VIRT | 13 | 89772 | -3 |
| Average | 17 | 279309 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $279 million. That figure was $227 million in DAR’s case. Investors Bancorp, Inc. (NASDAQ:ISBC) is the most popular stock in this table. On the other hand Cantel Medical Corp. (NYSE:CMD) 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 calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on DAR as the stock returned 24.4% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
