Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is DocuSign, Inc. (NASDAQ:DOCU), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
DocuSign, Inc. (NASDAQ:DOCU) shareholders have witnessed a decrease in activity from the world's largest hedge funds in recent months. DOCU was in 26 hedge funds' portfolios at the end of June. There were 34 hedge funds in our database with DOCU positions at the end of the previous quarter. Our calculations also showed that DOCU isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are many signals market participants can use to evaluate their holdings. Two of the most underrated signals are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can trounce the S&P 500 by a significant amount (see the details here).
Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a glance at the new hedge fund action encompassing DocuSign, Inc. (NASDAQ:DOCU).
What does smart money think about DocuSign, Inc. (NASDAQ:DOCU)?
At the end of the second quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in DOCU a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Matrix Capital Management was the largest shareholder of DocuSign, Inc. (NASDAQ:DOCU), with a stake worth $86.6 million reported as of the end of March. Trailing Matrix Capital Management was D E Shaw, which amassed a stake valued at $53.4 million. Echo Street Capital Management, Honeycomb Asset Management, and ThornTree Capital Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that DocuSign, Inc. (NASDAQ:DOCU) has witnessed falling interest from hedge fund managers, it's easy to see that there was a specific group of hedgies that decided to sell off their positions entirely heading into Q3. It's worth mentioning that Bain Capital's Brookside Capital cut the largest position of all the hedgies monitored by Insider Monkey, totaling close to $158.2 million in stock, and Gabriel Plotkin's Melvin Capital Management was right behind this move, as the fund dumped about $62.2 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 8 funds heading into Q3.
Let's go over hedge fund activity in other stocks similar to DocuSign, Inc. (NASDAQ:DOCU). We will take a look at Aqua America Inc (NYSE:WTR), Andeavor Logistics LP (NYSE:ANDX), China Southern Airlines Co Ltd (NYSE:ZNH), and Bright Horizons Family Solutions Inc (NYSE:BFAM). This group of stocks' market caps resemble DOCU's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WTR,21,726377,6 ANDX,5,34262,-1 ZNH,1,14307,-2 BFAM,20,244568,2 Average,11.75,254879,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $255 million. That figure was $328 million in DOCU's case. Aqua America Inc (NYSE:WTR) is the most popular stock in this table. On the other hand China Southern Airlines Co Ltd (NYSE:ZNH) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks DocuSign, Inc. (NASDAQ:DOCU) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on DOCU as the stock returned 24.6% during Q3 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.
Disclosure: None. This article was originally published at Insider Monkey.