Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in DigitalOcean Holdings, Inc. (NYSE:DOCN)? The smart money sentiment can provide an answer to this question.
DigitalOcean Holdings, Inc. (NYSE:DOCN) was in 27 hedge funds’ portfolios at the end of September. The all time high for this statistic was previously 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. DOCN investors should pay attention to an increase in hedge fund interest in recent months. There were 16 hedge funds in our database with DOCN holdings at the end of June. Our calculations also showed that DOCN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
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. Now we’re going to take a glance at the fresh hedge fund action encompassing DigitalOcean Holdings, Inc. (NYSE:DOCN).
Alex Sacerdote of Whale Rock Capital Management
Do Hedge Funds Think DOCN Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 69% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in DOCN a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
The largest stake in DigitalOcean Holdings, Inc. (NYSE:DOCN) was held by Whale Rock Capital Management, which reported holding $224.8 million worth of stock at the end of September. It was followed by Tiger Global Management LLC with a $132 million position. Other investors bullish on the company included Engle Capital, Shannon River Fund Management, and Tudor Investment Corp. In terms of the portfolio weights assigned to each position Engle Capital allocated the biggest weight to DigitalOcean Holdings, Inc. (NYSE:DOCN), around 10.93% of its 13F portfolio. Shannon River Fund Management is also relatively very bullish on the stock, earmarking 3.88 percent of its 13F equity portfolio to DOCN.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Whale Rock Capital Management, managed by Alex Sacerdote, initiated the most valuable position in DigitalOcean Holdings, Inc. (NYSE:DOCN). Whale Rock Capital Management had $224.8 million invested in the company at the end of the quarter. Spencer M. Waxman’s Shannon River Fund Management also initiated a $55.1 million position during the quarter. The other funds with new positions in the stock are Brandon Haley’s Holocene Advisors, Frank Fu’s CaaS Capital, and James Crichton’s Hitchwood Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as DigitalOcean Holdings, Inc. (NYSE:DOCN) but similarly valued. These stocks are BanColombia S.A. (NYSE:CIB), Mobile TeleSystems Public Joint Stock Company (NYSE:MBT), Organon & Co. (NYSE:OGN), Ternium S.A. (NYSE:TX), United Therapeutics Corporation (NASDAQ:UTHR), AGNC Investment Corp. (NASDAQ:AGNC), and First Citizens BancShares Inc. (NASDAQ:FCNCA). This group of stocks’ market values are closest to DOCN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CIB | 3 | 87716 | 0 |
| MBT | 6 | 236823 | -4 |
| OGN | 35 | 332340 | -9 |
| TX | 18 | 239719 | 3 |
| UTHR | 52 | 2177654 | 7 |
| AGNC | 16 | 81493 | -3 |
| FCNCA | 24 | 819665 | 3 |
| Average | 22 | 567916 | -0.4 |
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 $568 million. That figure was $758 million in DOCN’s case. United Therapeutics Corporation (NASDAQ:UTHR) is the most popular stock in this table. On the other hand BanColombia S.A. (NYSE:CIB) is the least popular one with only 3 bullish hedge fund positions. DigitalOcean Holdings, Inc. (NYSE:DOCN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DOCN is 64.5. 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 gained 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. Hedge funds were also right about betting on DOCN as the stock returned 12.5% since the end of Q3 (through 12/9) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Digitalocean Holdings Inc.
Follow Digitalocean Holdings Inc.
Suggested Articles:
- 15 Biggest VR Companies In The World
- 10 Best Junior Gold Mining Stocks To Buy
- 20 Fastest Growing Vacation Destinations In The US
Disclosure: None. This article was originally published at Insider Monkey.
