Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Domo Inc. (NASDAQ:DOMO).
Domo Inc. (NASDAQ:DOMO) has experienced a decrease in support from the world's most elite money managers lately. DOMO was in 14 hedge funds' portfolios at the end of June. There were 21 hedge funds in our database with DOMO holdings at the end of the previous quarter. Our calculations also showed that DOMO 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 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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Now we're going to take a look at the key hedge fund action surrounding Domo Inc. (NASDAQ:DOMO).
What does smart money think about Domo Inc. (NASDAQ:DOMO)?
Heading into the third quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DOMO over the last 16 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Sylebra Capital Management was the largest shareholder of Domo Inc. (NASDAQ:DOMO), with a stake worth $70 million reported as of the end of March. Trailing Sylebra Capital Management was Hunt Lane Capital, which amassed a stake valued at $27.3 million. Archon Capital Management, Two Sigma Advisors, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as Domo Inc. (NASDAQ:DOMO) has witnessed a decline in interest from hedge fund managers, it's easy to see that there was a specific group of hedge funds who were dropping their positions entirely by the end of the second quarter. Interestingly, Louis Bacon's Moore Global Investments said goodbye to the biggest position of the 750 funds followed by Insider Monkey, valued at an estimated $10.5 million in stock. David Costen Haley's fund, HBK Investments, also dumped its stock, about $6.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 7 funds by the end of the second quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Domo Inc. (NASDAQ:DOMO) but similarly valued. We will take a look at Eagle Pharmaceuticals Inc (NASDAQ:EGRX), Northern Oil & Gas, Inc. (NYSEAMEX:NOG), Genfit SA (NASDAQ:GNFT), and Univest Financial Corporation (NASDAQ:UVSP). This group of stocks' market caps match DOMO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EGRX,20,157855,-3 NOG,19,87321,-1 GNFT,6,46248,-4 UVSP,9,42023,0 Average,13.5,83362,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $130 million in DOMO's case. Eagle Pharmaceuticals Inc (NASDAQ:EGRX) is the most popular stock in this table. On the other hand Genfit SA (NASDAQ:GNFT) is the least popular one with only 6 bullish hedge fund positions. Domo Inc. (NASDAQ:DOMO) is not the most popular stock in this group but hedge fund interest is still above average. 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 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. Unfortunately DOMO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on DOMO were disappointed as the stock returned -41.5% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.