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Is Datadog (DDOG) Stock A Buy or Sell?

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Abigail Fisher
·5 min read
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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 887 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31st holdings, data that is available nowhere else. Should you consider Datadog, Inc. (NASDAQ:DDOG) for your portfolio? We'll look to this invaluable collective wisdom for the answer.

Is DDOG stock a buy or sell? Datadog, Inc. (NASDAQ:DDOG) has seen an increase in enthusiasm from smart money recently. Datadog, Inc. (NASDAQ:DDOG) was in 52 hedge funds' portfolios at the end of December. 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 Q4 rankings).

Daniel Sundheim D1 Capital
Daniel Sundheim D1 Capital

Daniel Sundheim of D1 Capital Partners

At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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 (or at the end of this article). Now we're going to take a glance at the fresh hedge fund action surrounding Datadog, Inc. (NASDAQ:DDOG).

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

At Q4's end, a total of 52 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards DDOG over the last 22 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Among these funds, Lone Pine Capital held the most valuable stake in Datadog, Inc. (NASDAQ:DDOG), which was worth $698 million at the end of the fourth quarter. On the second spot was Tiger Global Management LLC which amassed $468.3 million worth of shares. D1 Capital Partners, Whale Rock Capital Management, and Coatue 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 Stepstone Group allocated the biggest weight to Datadog, Inc. (NASDAQ:DDOG), around 69.01% of its 13F portfolio. Ashe Capital is also relatively very bullish on the stock, designating 6.72 percent of its 13F equity portfolio to DDOG.

As industrywide interest jumped, key hedge funds were breaking ground themselves. D1 Capital Partners, managed by Daniel Sundheim, established the most valuable position in Datadog, Inc. (NASDAQ:DDOG). D1 Capital Partners had $385.5 million invested in the company at the end of the quarter. Brandon Haley's Holocene Advisors also initiated a $55.6 million position during the quarter. The other funds with brand new DDOG positions are James Crichton's Hitchwood Capital Management, Hamilton Helmer's Strategy Capital, and Dmitry Balyasny's Balyasny Asset Management.

Let's check out 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 Chunghwa Telecom Co., Ltd (NYSE:CHT), PACCAR Inc (NASDAQ:PCAR), Bilibili Inc. (NASDAQ:BILI), Eversource Energy (NYSE:ES), Public Service Enterprise Group Incorporated (NYSE:PEG), Otis Worldwide Corporation (NYSE:OTIS), and Rockwell Automation Inc. (NYSE:ROK). This group of stocks' market caps resemble DDOG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CHT,5,157212,0 PCAR,34,418647,0 BILI,46,3083768,9 ES,24,511581,4 PEG,28,374371,5 OTIS,59,2512029,6 ROK,35,635317,-9 Average,33,1098989,2.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $1099 million. That figure was $2899 million in DDOG's case. Otis Worldwide Corporation (NYSE:OTIS) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (NYSE:CHT) is the least popular one with only 5 bullish hedge fund positions. Datadog, Inc. (NASDAQ:DDOG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DDOG is 80.9. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and beat the market again by 0.8 percentage points. Unfortunately DDOG wasn't nearly as popular as these 30 stocks and hedge funds that were betting on DDOG were disappointed as the stock returned -14.6% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 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.

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