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Hedge Funds Welcomed Datadog, Inc. (DDOG) With Open Arms

Reymerlyn Martin

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Datadog, Inc. (NASDAQ:DDOG) based on that data.

Datadog, Inc. (NASDAQ:DDOG) was in 39 hedge funds' portfolios at the end of the third quarter of 2019. DDOG shareholders have witnessed an increase in enthusiasm from smart money of late. There were 0 hedge funds in our database with DDOG holdings at the end of the previous quarter. Our calculations also showed that DDOG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_26088" align="aligncenter" width="600"] Chase Coleman of Tiger Global[/caption]

Chase Coleman of Tiger Global

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's check out the new hedge fund action regarding Datadog, Inc. (NASDAQ:DDOG).

What does smart money think about Datadog, Inc. (NASDAQ:DDOG)?

At the end of the third quarter, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 39 from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in DDOG a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

DDOG_nov2019

Among these funds, Viking Global held the most valuable stake in Datadog, Inc. (NASDAQ:DDOG), which was worth $30.5 million at the end of the third quarter. On the second spot was Whale Rock Capital Management which amassed $25.3 million worth of shares. Citadel Investment Group, Coatue Management, and Tiger Global 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 Kayak Investment Partners allocated the biggest weight to Datadog, Inc. (NASDAQ:DDOG), around 4.35% of its portfolio. Mondrian Capital is also relatively very bullish on the stock, designating 2.78 percent of its 13F equity portfolio to DDOG.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Viking Global, managed by Andreas Halvorsen, created the largest position in Datadog, Inc. (NASDAQ:DDOG). Viking Global had $30.5 million invested in the company at the end of the quarter. Alex Sacerdote's Whale Rock Capital Management also made a $25.3 million investment in the stock during the quarter. The following funds were also among the new DDOG investors: Ken Griffin's Citadel Investment Group, Philippe Laffont's Coatue Management, and Chase Coleman's Tiger Global Management.

Let's go over hedge fund activity in other stocks similar to Datadog, Inc. (NASDAQ:DDOG). We will take a look at The Western Union Company (NYSE:WU), Autohome Inc (NYSE:ATHM), Chewy, Inc. (NYSE:CHWY), and Trimble Inc. (NASDAQ:TRMB). This group of stocks' market valuations resemble DDOG's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WU,20,413091,-3 ATHM,10,1157371,-6 CHWY,24,477781,-14 TRMB,25,592535,9 Average,19.75,660195,-3.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $660 million. That figure was $209 million in DDOG's case. Trimble Inc. (NASDAQ:TRMB) is the most popular stock in this table. On the other hand Autohome Inc (NYSE:ATHM) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Datadog, Inc. (NASDAQ:DDOG) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on DDOG as the stock returned 20.2% during the first two months of Q4 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.

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