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Hedge Funds Have Never Been This Bullish On Datadog, Inc. (DDOG)

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Datadog, Inc. (NASDAQ:DDOG) based on those filings.

Datadog, Inc. (NASDAQ:DDOG) was in 44 hedge funds’ portfolios at the end of the first quarter of 2020. DDOG shareholders have witnessed an increase in enthusiasm from smart money recently. There were 32 hedge funds in our database with DDOG holdings at the end of the previous quarter. Our calculations also showed that DDOG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 72% since March 2017 and outperformed the S&P 500 ETFs by more than 44 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Glen Kacher of Light Street Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. Also, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to review the latest hedge fund action surrounding Datadog, Inc. (NASDAQ:DDOG).

How have hedgies been trading Datadog, Inc. (NASDAQ:DDOG)?

At Q1’s end, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards DDOG over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Alex Sacerdote’s Whale Rock Capital Management has the largest position in Datadog, Inc. (NASDAQ:DDOG), worth close to $233.1 million, accounting for 3.2% of its total 13F portfolio. The second most bullish fund manager is Chase Coleman of Tiger Global Management LLC, with a $132.4 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions consist of Philippe Laffont’s Coatue Management, Brandon Haley’s Holocene Advisors and Steve Cohen’s Point72 Asset Management. In terms of the portfolio weights assigned to each position Stepstone Group allocated the biggest weight to Datadog, Inc. (NASDAQ:DDOG), around 75.43% of its 13F portfolio. Berylson Capital Partners is also relatively very bullish on the stock, dishing out 5.69 percent of its 13F equity portfolio to DDOG.

As industrywide interest jumped, specific money managers have been driving this bullishness. Light Street Capital, managed by Glen Kacher, created the biggest position in Datadog, Inc. (NASDAQ:DDOG). Light Street Capital had $48 million invested in the company at the end of the quarter. Daniel Patrick Gibson’s Sylebra Capital Management also made a $23.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Renaissance Technologies, Jose Fernandez’s Stepstone Group, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Datadog, Inc. (NASDAQ:DDOG) but similarly valued. We will take a look at XP Inc. (NASDAQ:XP), FMC Corporation (NYSE:FMC), Fifth Third Bancorp (NASDAQ:FITB), and Brookfield Infrastructure Partners L.P. (NYSE:BIP). This group of stocks’ market valuations resemble DDOG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
XP 13 165830 -15
FMC 39 560040 4
FITB 30 384097 -11
BIP 14 55630 3
Average 24 291399 -4.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $291 million. That figure was $861 million in DDOG’s case. FMC Corporation (NYSE:FMC) is the most popular stock in this table. On the other hand XP Inc. (NASDAQ:XP) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Datadog, Inc. (NASDAQ:DDOG) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 7.9% in 2020 through May 22nd but still managed to beat the market by 15.6 percentage points. Hedge funds were also right about betting on DDOG as the stock returned 103% so far in Q2 (through May 22nd) 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.