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

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In this article we will take a look at whether hedge funds think Datadog, Inc. (NASDAQ:DDOG) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Datadog, Inc. (NASDAQ:DDOG) investors should be aware of an increase in activity from the world's largest hedge funds recently. Datadog, Inc. (NASDAQ:DDOG) was in 62 hedge funds' portfolios at the end of September. The all time high for this statistic was previously 57. This means the bullish number of hedge fund positions in this stock currently sits at its new all time high. Our calculations also showed that DDOG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Now let's take a glance at the recent hedge fund action regarding Datadog, Inc. (NASDAQ:DDOG).

Gabriel Plotkin Melvin Capital Management
Gabriel Plotkin Melvin Capital Management

Gabriel Plotkin of Melvin Capital Management

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

At the end of September, a total of 62 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the second quarter of 2021. On the other hand, there were a total of 42 hedge funds with a bullish position in DDOG a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

The largest stake in Datadog, Inc. (NASDAQ:DDOG) was held by Tiger Global Management LLC, which reported holding $740.7 million worth of stock at the end of September. It was followed by Lone Pine Capital with a $656.8 million position. Other investors bullish on the company included D1 Capital Partners, Whale Rock Capital Management, and Melvin Capital Management. In terms of the portfolio weights assigned to each position Ashe Capital allocated the biggest weight to Datadog, Inc. (NASDAQ:DDOG), around 11.52% of its 13F portfolio. General Equity Partners is also relatively very bullish on the stock, designating 9.71 percent of its 13F equity portfolio to DDOG.

As aggregate interest increased, specific money managers have jumped into Datadog, Inc. (NASDAQ:DDOG) headfirst. Renaissance Technologies, created the largest position in Datadog, Inc. (NASDAQ:DDOG). Renaissance Technologies had $161.2 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also made a $153.8 million investment in the stock during the quarter. The other funds with brand new DDOG positions are Gabriel Plotkin's Melvin Capital Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, and James Crichton's Hitchwood Capital Management.

Let's also examine hedge fund activity in other stocks similar to Datadog, Inc. (NASDAQ:DDOG). These stocks are Amphenol Corporation (NYSE:APH), Lloyds Banking Group PLC (NYSE:LYG), Barclays PLC (NYSE:BCS), Match Group, Inc. (NASDAQ:MTCH), Roblox Corporation (NYSE:RBLX), Ambev SA (NYSE:ABEV), and Southern Copper Corporation (NYSE:SCCO). This group of stocks' market valuations are closest to DDOG's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APH,26,897948,-13 LYG,8,16143,0 BCS,12,105770,1 MTCH,56,2662829,-7 RBLX,50,3575923,1 ABEV,15,79897,-3 SCCO,23,403491,0 Average,27.1,1106000,-3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.1 hedge funds with bullish positions and the average amount invested in these stocks was $1106 million. That figure was $4935 million in DDOG's case. Match Group, Inc. (NASDAQ:MTCH) is the most popular stock in this table. On the other hand Lloyds Banking Group PLC (NYSE:LYG) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Datadog, Inc. (NASDAQ:DDOG) is more popular among hedge funds. Our overall hedge fund sentiment score for DDOG 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 28.6% in 2021 through November 30th but still managed to beat the market by 5.6 percentage points. Hedge funds were also right about betting on DDOG as the stock returned 26.1% since the end of September (through 11/30) 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.