Hedge Funds Are Selling Darling Ingredients Inc. (DAR)

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 Darling Ingredients Inc. (NYSE:DAR).

Is Darling Ingredients Inc. (NYSE:DAR) worth your attention right now? The smart money was taking a pessimistic view. The number of long hedge fund positions were cut by 8 recently. Darling Ingredients Inc. (NYSE:DAR) was in 33 hedge funds’ portfolios at the end of September. The all time high for this statistic is 41. Our calculations also showed that DAR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

Peter Algert of Algert Global

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind we’re going to check out the key hedge fund action encompassing Darling Ingredients Inc. (NYSE:DAR).

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

At third quarter’s end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards DAR over the last 25 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Is DAR A Good Stock To Buy?

Among these funds, Impax Asset Management held the most valuable stake in Darling Ingredients Inc. (NYSE:DAR), which was worth $209.2 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $117 million worth of shares. Parsifal Capital Management, Millennium Management, and Anomaly Capital 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 Parsifal Capital Management allocated the biggest weight to Darling Ingredients Inc. (NYSE:DAR), around 6.26% of its 13F portfolio. Anomaly Capital Management is also relatively very bullish on the stock, designating 2.11 percent of its 13F equity portfolio to DAR.

Due to the fact that Darling Ingredients Inc. (NYSE:DAR) has witnessed declining sentiment from the smart money, we can see that there was a specific group of fund managers who sold off their full holdings heading into Q4. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management said goodbye to the largest investment of all the hedgies followed by Insider Monkey, valued at an estimated $20.8 million in stock, and Naval Khera’s Brightline Capital was right behind this move, as the fund sold off about $20.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 8 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Darling Ingredients Inc. (NYSE:DAR). We will take a look at Dropbox, Inc. (NASDAQ:DBX), Globant SA (NYSE:GLOB), Atmos Energy Corporation (NYSE:ATO), Bunge Limited (NYSE:BG), Universal Health Services, Inc. (NYSE:UHS), Axovant Sciences Ltd (NYSE:AXON), and Lamar Advertising Company (NASDAQ:LAMR). All of these stocks’ market caps resemble DAR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DBX 41 967573 2
GLOB 21 601276 -2
ATO 16 77442 -2
BG 37 538805 -3
UHS 43 751314 2
AXON 32 529860 8
LAMR 30 445462 -2
Average 31.4 558819 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.4 hedge funds with bullish positions and the average amount invested in these stocks was $559 million. That figure was $659 million in DAR’s case. Universal Health Services, Inc. (NYSE:UHS) is the most popular stock in this table. On the other hand Atmos Energy Corporation (NYSE:ATO) is the least popular one with only 16 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 52.6. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately DAR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on DAR were disappointed as the stock returned -6.1% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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