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 second 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 6 years and analyze what the smart money thinks of Spotify Technology S.A. (NYSE:SPOT) based on that data.
Is Spotify Technology S.A. (NYSE:SPOT) a healthy stock for your portfolio? Hedge funds were getting more optimistic. The number of bullish hedge fund bets rose by 2 recently. Spotify Technology S.A. (NYSE:SPOT) was in 48 hedge funds’ portfolios at the end of June. The all time high for this statistic is 67. Our calculations also showed that SPOT isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 79 percentage points since March 2017 (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.
Chase Coleman of Tiger Global
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. Now let’s take a look at the fresh hedge fund action encompassing Spotify Technology S.A. (NYSE:SPOT).
Do Hedge Funds Think SPOT Is A Good Stock To Buy Now?
At the end of June, a total of 48 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the previous quarter. By comparison, 36 hedge funds held shares or bullish call options in SPOT a year ago. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in Spotify Technology S.A. (NYSE:SPOT) was held by ARK Investment Management, which reported holding $1320.6 million worth of stock at the end of June. It was followed by Tiger Global Management LLC with a $870.4 million position. Other investors bullish on the company included GLG Partners, Tremblant Capital, and Citadel Investment Group. 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 11.89% of its 13F portfolio. Thunderbird Partners is also relatively very bullish on the stock, earmarking 8.39 percent of its 13F equity portfolio to SPOT.
With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Thunderbird Partners, managed by David Fear, created the biggest position in Spotify Technology S.A. (NYSE:SPOT). Thunderbird Partners had $93.5 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also initiated a $31.7 million position during the quarter. The following funds were also among the new SPOT investors: Robert Joseph Caruso’s Select Equity Group, Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital, and Steve Cohen’s Point72 Asset Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Spotify Technology S.A. (NYSE:SPOT) but similarly valued. We will take a look at Public Storage (NYSE:PSA), Metlife Inc (NYSE:MET), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), Biogen Inc. (NASDAQ:BIIB), Carvana Co. (NYSE:CVNA), ING Groep N.V. (NYSE:ING), and UBS Group AG (NYSE:UBS). This group of stocks’ market values resemble SPOT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PSA | 27 | 1089757 | 1 |
| MET | 41 | 1056766 | 9 |
| VRTX | 60 | 2808847 | -8 |
| BIIB | 67 | 3116691 | 4 |
| CVNA | 63 | 8904829 | -1 |
| ING | 9 | 601603 | -1 |
| UBS | 15 | 176356 | -1 |
| Average | 40.3 | 2536407 | 0.4 |
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 $2536 million. That figure was $3497 million in SPOT’s case. Biogen Inc. (NASDAQ:BIIB) is the most popular stock in this table. On the other hand ING Groep N.V. (NYSE:ING) is the least popular one with only 9 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 62.1. 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 22.9% in 2021 through October 1st and beat the market again by 5.6 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 -16.8% since the end of June (through 10/1) 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 many 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.
