We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Spotify Technology S.A. (NYSE:SPOT) and determine whether hedge funds skillfully traded this stock.
Spotify Technology S.A. (NYSE:SPOT) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 48 hedge funds’ portfolios at the end of September. Our calculations also showed that SPOT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Dow Inc. (NYSE:DOW), Simon Property Group, Inc (NYSE:SPG), and Microchip Technology Incorporated (NASDAQ:MCHP) to gather more data points.
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. With all of this in mind we’re going to take a look at the key hedge fund action encompassing Spotify Technology S.A. (NYSE:SPOT).
Paul Tudor Jones of Tudor Investment Corp
Do Hedge Funds Think SPOT Is A Good Stock To Buy Now?
At Q3’s end, a total of 48 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SPOT over the last 25 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, ARK Investment Management was the largest shareholder of Spotify Technology S.A. (NYSE:SPOT), with a stake worth $1039.7 million reported as of the end of September. Trailing ARK Investment Management was Tiger Global Management LLC, which amassed a stake valued at $597.5 million. Citadel Investment Group, GLG Partners, and Citadel Investment Group 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 Greenlea Lane Capital allocated the biggest weight to Spotify Technology S.A. (NYSE:SPOT), around 10.58% of its 13F portfolio. Thunderbird Partners is also relatively very bullish on the stock, earmarking 9.41 percent of its 13F equity portfolio to SPOT.
Judging by the fact that Spotify Technology S.A. (NYSE:SPOT) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there was a specific group of fund managers who were dropping their positions entirely by the end of the third quarter. Intriguingly, Anand Parekh’s Alyeska Investment Group dumped the biggest stake of the 750 funds watched by Insider Monkey, valued at close to $31.7 million in stock, and Michael R. Weisberg’s Crestwood Capital Management was right behind this move, as the fund said goodbye to about $8.5 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to Spotify Technology S.A. (NYSE:SPOT). We will take a look at Dow Inc. (NYSE:DOW), Simon Property Group, Inc (NYSE:SPG), Microchip Technology Incorporated (NASDAQ:MCHP), Vodafone Group Plc (NASDAQ:VOD), Biogen Inc. (NASDAQ:BIIB), O’Reilly Automotive Inc (NASDAQ:ORLY), and Cadence Design Systems Inc (NASDAQ:CDNS). All of these stocks’ market caps match SPOT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DOW | 42 | 747419 | 2 |
| SPG | 38 | 726426 | 1 |
| MCHP | 41 | 1122273 | -9 |
| VOD | 18 | 613771 | 1 |
| BIIB | 66 | 1923895 | -1 |
| ORLY | 44 | 2294006 | 0 |
| CDNS | 33 | 1922561 | 0 |
| Average | 40.3 | 1335764 | -0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.3 hedge funds with bullish positions and the average amount invested in these stocks was $1336 million. That figure was $3039 million in SPOT’s case. Biogen Inc. (NASDAQ:BIIB) is the most popular stock in this table. On the other hand Vodafone Group Plc (NASDAQ:VOD) is the least popular one with only 18 bullish hedge fund positions. Spotify Technology S.A. (NYSE:SPOT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SPOT is 57.7. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, SPOT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SPOT were disappointed as the stock returned -12.9% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.
Follow Spotify Technology S.a. (NYSE:SPOT)
Follow Spotify Technology S.a. (NYSE:SPOT)
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Disclosure: None. This article was originally published at Insider Monkey.
