How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Darling Ingredients Inc. (NYSE:DAR).
Darling Ingredients Inc. (NYSE:DAR) investors should be aware of an increase in support from the world’s most elite money managers lately. Darling Ingredients Inc. (NYSE:DAR) was in 41 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 36. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 33 hedge funds in our database with DAR holdings at the end of March. Our calculations also showed that DAR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ken Fisher of Fisher Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech 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 we’re going to take a look at the latest hedge fund action regarding Darling Ingredients Inc. (NYSE:DAR).
Do Hedge Funds Think DAR Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DAR over the last 24 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in Darling Ingredients Inc. (NYSE:DAR) was held by Impax Asset Management, which reported holding $190.7 million worth of stock at the end of June. It was followed by Millennium Management with a $132.4 million position. Other investors bullish on the company included Fisher Asset Management, Parsifal Capital Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Brightline Capital allocated the biggest weight to Darling Ingredients Inc. (NYSE:DAR), around 13.63% of its 13F portfolio. Parsifal Capital Management is also relatively very bullish on the stock, designating 6.46 percent of its 13F equity portfolio to DAR.
Consequently, key money managers have jumped into Darling Ingredients Inc. (NYSE:DAR) headfirst. Renaissance Technologies, created the largest position in Darling Ingredients Inc. (NYSE:DAR). Renaissance Technologies had $35.4 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $26.7 million position during the quarter. The other funds with new positions in the stock are Anand Parekh’s Alyeska Investment Group, Greg Eisner’s Engineers Gate Manager, and Jinghua Yan’s TwinBeech Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Darling Ingredients Inc. (NYSE:DAR) but similarly valued. We will take a look at Lightspeed Commerce Inc. (NYSE:LSPD), Repligen Corporation (NASDAQ:RGEN), ICON Public Limited Company (NASDAQ:ICLR), Magellan Midstream Partners, L.P. (NYSE:MMP), Teva Pharmaceutical Industries Limited (NYSE:TEVA), Regency Centers Corp (NASDAQ:REG), and Norwegian Cruise Line Holdings Ltd (NYSE:NCLH). This group of stocks’ market values are closest to DAR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LSPD | 29 | 649487 | 8 |
| RGEN | 35 | 1285346 | -3 |
| ICLR | 39 | 1301455 | 10 |
| MMP | 13 | 89137 | -1 |
| TEVA | 22 | 947100 | -2 |
| REG | 25 | 192591 | 8 |
| NCLH | 43 | 606617 | 9 |
| Average | 29.4 | 724533 | 4.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.4 hedge funds with bullish positions and the average amount invested in these stocks was $725 million. That figure was $839 million in DAR’s case. Norwegian Cruise Line Holdings Ltd (NYSE:NCLH) is the most popular stock in this table. On the other hand Magellan Midstream Partners, L.P. (NYSE:MMP) is the least popular one with only 13 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 86.7. 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 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Hedge funds were also right about betting on DAR as the stock returned 7.3% since the end of Q2 (through 10/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Darling Ingredients Inc. (NYSE:DAR)
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Disclosure: None. This article was originally published at Insider Monkey.
