Hedge Funds Are Betting On Datadog, Inc. (DDOG)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Datadog, Inc. (NASDAQ:DDOG).

Datadog, Inc. (NASDAQ:DDOG) shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. Datadog, Inc. (NASDAQ:DDOG) was in 56 hedge funds’ portfolios at the end of June. The all time high for this statistic is 57. Our calculations also showed that DDOG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

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 EV 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. With all of this in mind let’s take a gander at the key hedge fund action encompassing Datadog, Inc. (NASDAQ:DDOG).

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

At the end of the second quarter, a total of 56 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DDOG over the last 24 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Lone Pine Capital has the number one position in Datadog, Inc. (NASDAQ:DDOG), worth close to $606.9 million, comprising 1.9% of its total 13F portfolio. Coming in second is Chase Coleman of Tiger Global Management LLC, with a $519.6 million position; the fund has 1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions include Daniel Sundheim’s D1 Capital Partners, Alex Sacerdote’s Whale Rock Capital Management and Robert Pitts’s Steadfast Capital Management. In terms of the portfolio weights assigned to each position Stepstone Group allocated the biggest weight to Datadog, Inc. (NASDAQ:DDOG), around 88.78% of its 13F portfolio. Ashe Capital is also relatively very bullish on the stock, earmarking 8.7 percent of its 13F equity portfolio to DDOG.

Consequently, key money managers have been driving this bullishness. Steadfast Capital Management, managed by Robert Pitts, established the most outsized position in Datadog, Inc. (NASDAQ:DDOG). Steadfast Capital Management had $142.8 million invested in the company at the end of the quarter. Gabriel Plotkin’s Melvin Capital Management also made a $130.1 million investment in the stock during the quarter. The following funds were also among the new DDOG investors: Glen Kacher’s Light Street Capital, Ben Jacobs’s Anomaly Capital Management, and Suraj Parkash Chopra’s Force Hill Capital Management.

Let’s now review hedge fund activity in other stocks similar to Datadog, Inc. (NASDAQ:DDOG). These stocks are NatWest Group plc (NYSE:NWG), Valero Energy Corporation (NYSE:VLO), Liberty Broadband Corp (NASDAQ:LBRDA), BeiGene, Ltd. (NASDAQ:BGNE), Skyworks Solutions Inc (NASDAQ:SWKS), Li Auto Inc. (NASDAQ:LI), and Chunghwa Telecom Co., Ltd (NYSE:CHT). All of these stocks’ market caps match DDOG’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.3 hedge funds with bullish positions and the average amount invested in these stocks was $1273 million. That figure was $3235 million in DDOG’s case. Valero Energy Corporation (NYSE:VLO) is the most popular stock in this table. On the other hand NatWest Group plc (NYSE:NWG) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Datadog, Inc. (NASDAQ:DDOG) is more popular among hedge funds. Our overall hedge fund sentiment score for DDOG is 89.5. 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 returned 25.7% in 2021 through September 27th but still managed to beat the market by 6.2 percentage points. Hedge funds were also right about betting on DDOG as the stock returned 36.4% since the end of June (through 9/27) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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