Before we spend many hours researching a company, we'd like to analyze what insiders, hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Domino's Pizza, Inc. (NYSE: DPZ ).
Domino's Pizza, Inc. (NYSE: DPZ ) investors should pay attention to an increase in hedge fund interest in recent months. Our calculations also showed that DPZ isn't among the 30 most popular stocks among hedge funds .
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 ( see the details here ). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to check out the fresh hedge fund action encompassing Domino's Pizza, Inc. (NYSE: DPZ ).
How are hedge funds trading Domino's Pizza, Inc. (NYSE:DPZ)?
Heading into the fourth quarter of 2018, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from one quarter earlier. By comparison, 33 hedge funds held shares or bullish call options in DPZ heading into this year. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Domino's Pizza, Inc. (NYSE:DPZ), which was worth $938.6 million at the end of the third quarter. On the second spot was Tiger Global Management LLC which amassed $620.8 million worth of shares. Moreover, Fisher Asset Management, Two Sigma Advisors, and Hitchwood Capital Management were also bullish on Domino's Pizza, Inc. (NYSE:DPZ), allocating a large percentage of their portfolios to this stock.
Now, key hedge funds have been driving this bullishness. Hitchwood Capital Management , managed by James Crichton, created the most outsized position in Domino's Pizza, Inc. (NYSE:DPZ). Hitchwood Capital Management had $59 million invested in the company at the end of the quarter. James Parsons's Junto Capital Management also made a $29.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Robert Pohly's Samlyn Capital , Dmitry Balyasny's Balyasny Asset Management, and Andrew Feldstein and Stephen Siderow's Blue Mountain Capital.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Domino's Pizza, Inc. (NYSE:DPZ) but similarly valued. These stocks are Cenovus Energy Inc (NYSE: CVE ), HEICO Corporation (NYSE: HEI ), HollyFrontier Corporation (NYSE: HFC ), and Seattle Genetics, Inc. (NASDAQ: SGEN ). This group of stocks' market values resemble DPZ's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CVE,13,394053,-9 HEI,30,866787,10 HFC,26,627597,1 SGEN,15,4295030,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $1.55 billion. That figure was $2.3 billion in DPZ's case. HEICO Corporation (NYSE: HEI ) is the most popular stock in this table. On the other hand Cenovus Energy Inc (NYSE: CVE ) is the least popular one with only 13 bullish hedge fund positions. Domino's Pizza, Inc. (NYSE:DPZ) 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. In this regard HEI might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey .