Is Domo Inc. (DOMO) Going to Burn These Hedge Funds?

·6 min read

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on June 30th. We at Insider Monkey have made an extensive database of more than 873 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Domo Inc. (NASDAQ:DOMO) based on those filings.

Domo Inc. (NASDAQ:DOMO) shareholders have witnessed a decrease in support from the world's most elite money managers in recent months. Domo Inc. (NASDAQ:DOMO) was in 25 hedge funds' portfolios at the end of June. The all time high for this statistic is 27. There were 27 hedge funds in our database with DOMO holdings at the end of March. Our calculations also showed that DOMO isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David Atterbury - Whetstone Capital
David Atterbury - Whetstone Capital

David Atterbury of Whetstone Capital Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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 homepage. Keeping this in mind we're going to go over the key hedge fund action regarding Domo Inc. (NASDAQ:DOMO).

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

Heading into the third quarter of 2021, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in DOMO a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Among these funds, Whetstone Capital Advisors held the most valuable stake in Domo Inc. (NASDAQ:DOMO), which was worth $61.8 million at the end of the second quarter. On the second spot was Two Sigma Advisors which amassed $38.8 million worth of shares. Renaissance Technologies, Collaborative Holdings Management, and Portolan Capital 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 Collaborative Holdings Management allocated the biggest weight to Domo Inc. (NASDAQ:DOMO), around 15.8% of its 13F portfolio. Whetstone Capital Advisors is also relatively very bullish on the stock, earmarking 11.48 percent of its 13F equity portfolio to DOMO.

Due to the fact that Domo Inc. (NASDAQ:DOMO) has witnessed a decline in interest from the aggregate hedge fund industry, we can see that there lies a certain "tier" of hedgies who sold off their entire stakes by the end of the second quarter. At the top of the heap, Dmitry Balyasny's Balyasny Asset Management dumped the biggest position of the 750 funds watched by Insider Monkey, comprising an estimated $17.5 million in stock. Philip Hempleman's fund, Ardsley Partners, also sold off its stock, about $4.1 million worth. These transactions are interesting, as total hedge fund interest dropped by 2 funds by the end of the second quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Domo Inc. (NASDAQ:DOMO) but similarly valued. These stocks are Liberty Oilfield Services Inc. (NYSE:LBRT), Green Dot Corporation (NYSE:GDOT), Cedar Fair, L.P. (NYSE:FUN), Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB), Live Oak Bancshares Inc (NASDAQ:LOB), Proto Labs Inc (NYSE:PRLB), and Tri Pointe Homes, Inc. (NYSE:TPH). 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 LBRT,20,66417,10 GDOT,22,538528,-4 FUN,13,99875,-1 OMAB,4,19340,0 LOB,11,98231,1 PRLB,19,361092,1 TPH,24,153445,-2 Average,16.1,190990,0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.1 hedge funds with bullish positions and the average amount invested in these stocks was $191 million. That figure was $354 million in DOMO's case. Tri Pointe Homes, Inc. (NYSE:TPH) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Domo Inc. (NASDAQ:DOMO) is more popular among hedge funds. Our overall hedge fund sentiment score for DOMO is 80.8. 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 24% in 2021 through October 22nd but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on DOMO as the stock returned 13.7% since the end of June (through 10/22) 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.

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