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Was The Smart Money Right About Piling Into DocuSign, Inc. (DOCU)?

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·5 min read
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Is DocuSign, Inc. (NASDAQ:DOCU) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

DocuSign, Inc. (NASDAQ:DOCU) has experienced an increase in hedge fund sentiment lately. 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 was previously 62. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 62 hedge funds in our database with DOCU holdings at the end of September. Our calculations also showed that DOCU isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).


James Dinan of York Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we're going to go over the latest hedge fund action surrounding DocuSign, Inc. (NASDAQ:DOCU).

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

At the end of December, a total of 67 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the third quarter of 2020. On the other hand, there were a total of 33 hedge funds with a bullish position in DOCU a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in DocuSign, Inc. (NASDAQ:DOCU) was held by Lone Pine Capital, which reported holding $901.7 million worth of stock at the end of December. It was followed by ARK Investment Management with a $484.6 million position. Other investors bullish on the company included Arrowstreet Capital, Tiger Global Management LLC, and Matrix Capital Management. 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.

Consequently, key hedge funds have been driving this bullishness. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, created the most valuable 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 made a $18.1 million investment in the stock 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 review hedge fund activity in other stocks - not necessarily in the same industry as DocuSign, Inc. (NASDAQ:DOCU) but similarly valued. These stocks are 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 values match DOCU's market value.

[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 12.3% in 2021 through April 19th and still beat the market by 0.9 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 0.4% since the end of the fourth quarter (through 4/19) 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.

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