In this article we will analyze whether DoorDash, Inc. (NYSE:DASH) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Hedge fund interest in DoorDash, Inc. (NYSE:DASH) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that DASH isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare DASH to other stocks including American Electric Power Company, Inc. (NYSE:AEP), National Grid plc (NYSE:NGG), and Roku, Inc. (NASDAQ:ROKU) to get a better sense of its popularity.
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 monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Philippe Laffont of Coatue Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery 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. 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 homepage. Keeping this in mind let’s take a glance at the new hedge fund action regarding DoorDash, Inc. (NYSE:DASH).
Do Hedge Funds Think DASH Is A Good Stock To Buy Now?
At the end of March, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in DASH over the last 23 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Among these funds, Coatue Management held the most valuable stake in DoorDash, Inc. (NYSE:DASH), which was worth $1214 million at the end of the fourth quarter. On the second spot was Lone Pine Capital which amassed $881.7 million worth of shares. Tiger Global Management LLC, SCGE Management, and Darsana Capital Partners 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 Himension Capital allocated the biggest weight to DoorDash, Inc. (NYSE:DASH), around 21.32% of its 13F portfolio. Darsana Capital Partners is also relatively very bullish on the stock, dishing out 12.9 percent of its 13F equity portfolio to DASH.
Since DoorDash, Inc. (NYSE:DASH) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there is a sect of money managers that elected to cut their positions entirely heading into Q2. At the top of the heap, Brandon Haley’s Holocene Advisors dumped the largest investment of all the hedgies tracked by Insider Monkey, valued at close to $54.2 million in stock, and Gaurav Kapadia’s XN Exponent Advisors was right behind this move, as the fund dumped about $51.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to DoorDash, Inc. (NYSE:DASH). We will take a look at American Electric Power Company, Inc. (NYSE:AEP), National Grid plc (NYSE:NGG), Roku, Inc. (NASDAQ:ROKU), IDEXX Laboratories, Inc. (NASDAQ:IDXX), Microchip Technology Incorporated (NASDAQ:MCHP), Manulife Financial Corporation (NYSE:MFC), and eBay Inc (NASDAQ:EBAY). This group of stocks’ market values match DASH’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AEP | 32 | 809288 | 0 |
| NGG | 9 | 331590 | 4 |
| ROKU | 63 | 3781353 | 3 |
| IDXX | 49 | 2851712 | 3 |
| MCHP | 42 | 962773 | -3 |
| MFC | 17 | 190066 | -3 |
| EBAY | 51 | 3762465 | -2 |
| Average | 37.6 | 1812750 | 0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.6 hedge funds with bullish positions and the average amount invested in these stocks was $1813 million. That figure was $4775 million in DASH’s case. Roku, Inc. (NASDAQ:ROKU) is the most popular stock in this table. On the other hand National Grid plc (NYSE:NGG) is the least popular one with only 9 bullish hedge fund positions. DoorDash, Inc. (NYSE:DASH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DASH is 61.9. 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 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 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Hedge funds were also right about betting on DASH as the stock returned 34.8% since the end of Q1 (through 6/25) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
