Is DocuSign (DOCU) Stock A Buy or Sell?
We at Insider Monkey have gone over 887 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article, we look at what those funds think of DocuSign, Inc. (NASDAQ:DOCU) based on that data.
Is DOCU stock a buy or sell? DocuSign, Inc. (NASDAQ:DOCU) shareholders have witnessed an increase in hedge fund interest in recent months. DocuSign, Inc. (NASDAQ:DOCU) was in 67 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 62. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that DOCU isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Cathie Wood of ARK Investment Management
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Do Hedge Funds Think DOCU Is A Good Stock To Buy Now?
At fourth quarter's end, a total of 67 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. On the other hand, there were a total of 33 hedge funds with a bullish position in DOCU a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, Lone Pine Capital held the most valuable stake in DocuSign, Inc. (NASDAQ:DOCU), which was worth $901.7 million at the end of the fourth quarter. On the second spot was ARK Investment Management which amassed $484.6 million worth of shares. Arrowstreet Capital, Tiger Global Management LLC, and Matrix 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 First Growth Capital Management allocated the biggest weight to DocuSign, Inc. (NASDAQ:DOCU), around 9.14% of its 13F portfolio. Cota Capital is also relatively very bullish on the stock, designating 6.99 percent of its 13F equity portfolio to DOCU.
As aggregate interest increased, key money managers were leading the bulls' herd. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, created the biggest position in DocuSign, Inc. (NASDAQ:DOCU). Polar Capital had $71.9 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $18.1 million position during the quarter. The following funds were also among the new DOCU investors: James Dinan's York Capital Management, Nicolas Boullet's First Growth Capital Management, and Michael Gelband's ExodusPoint Capital.
Let's now take a look at hedge fund activity in other stocks similar to DocuSign, Inc. (NASDAQ:DOCU). We will take a look at Moderna, Inc. (NASDAQ:MRNA), American Electric Power Company, Inc. (NASDAQ:AEP), Veeva Systems Inc (NYSE:VEEV), Exelon Corporation (NASDAQ:EXC), Dow Inc. (NYSE:DOW), Carvana Co. (NYSE:CVNA), and Baxter International Inc. (NYSE:BAX). This group of stocks' market valuations match DOCU's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MRNA,41,1479400,9 AEP,32,331817,2 VEEV,36,884354,-2 EXC,30,729348,1 DOW,47,711306,5 CVNA,63,7071672,10 BAX,42,2801959,-9 Average,41.6,2001408,2.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 41.6 hedge funds with bullish positions and the average amount invested in these stocks was $2001 million. That figure was $4232 million in DOCU's case. Carvana Co. (NYSE:CVNA) is the most popular stock in this table. On the other hand Exelon Corporation (NASDAQ:EXC) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks DocuSign, Inc. (NASDAQ:DOCU) is more popular among hedge funds. Our overall hedge fund sentiment score for DOCU is 90. 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 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 7% in 2021 through March 12th and still beat the market by 1.6 percentage points. Unfortunately DOCU wasn't nearly as popular as these 30 stocks and hedge funds that were betting on DOCU were disappointed as the stock returned -5.4% since the end of the fourth quarter (through 3/12) 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 most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
