Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we publish an article with the title “Recession is Imminent: We Need A Travel Ban NOW”. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Coupa Software Incorporated (NASDAQ:COUP).
Coupa Software Incorporated (NASDAQ:COUP) was in 55 hedge funds’ portfolios at the end of December. COUP has experienced a decrease in support from the world’s most elite money managers recently. There were 57 hedge funds in our database with COUP positions at the end of the previous quarter. Our calculations also showed that COUP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most stock holders, hedge funds are seen as worthless, outdated financial vehicles of yesteryear. While there are more than 8000 funds with their doors open at the moment, Our researchers hone in on the elite of this club, around 850 funds. Most estimates calculate that this group of people handle the majority of the smart money’s total capital, and by watching their highest performing stock picks, Insider Monkey has spotted various investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Stephen Mandel of Lone Pine Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now let’s take a glance at the fresh hedge fund action surrounding Coupa Software Incorporated (NASDAQ:COUP).
How are hedge funds trading Coupa Software Incorporated (NASDAQ:COUP)?
Heading into the first quarter of 2020, a total of 55 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in COUP over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Coupa Software Incorporated (NASDAQ:COUP) was held by Whale Rock Capital Management, which reported holding $459.1 million worth of stock at the end of September. It was followed by Sylebra Capital Management with a $362 million position. Other investors bullish on the company included Lone Pine Capital, Viking Global, and Alkeon Capital Management. In terms of the portfolio weights assigned to each position Center Lake Capital allocated the biggest weight to Coupa Software Incorporated (NASDAQ:COUP), around 24.92% of its 13F portfolio. Crosslink Capital is also relatively very bullish on the stock, designating 16.53 percent of its 13F equity portfolio to COUP.
Judging by the fact that Coupa Software Incorporated (NASDAQ:COUP) has faced a decline in interest from the smart money, logic holds that there were a few hedge funds who sold off their full holdings in the third quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management dropped the biggest investment of the “upper crust” of funds monitored by Insider Monkey, totaling about $106.6 million in stock, and Gabriel Plotkin’s Melvin Capital Management was right behind this move, as the fund dropped about $61.5 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Coupa Software Incorporated (NASDAQ:COUP). We will take a look at Whirlpool Corporation (NYSE:WHR), Tata Motors Limited (NYSE:TTM), Snap-on Incorporated (NYSE:SNA), and Kirkland Lake Gold Ltd. (NYSE:KL). All of these stocks’ market caps resemble COUP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WHR | 28 | 1045246 | -3 |
| TTM | 11 | 148219 | 4 |
| SNA | 27 | 557734 | 0 |
| KL | 24 | 508654 | 8 |
| Average | 22.5 | 564963 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $565 million. That figure was $2625 million in COUP’s case. Whirlpool Corporation (NYSE:WHR) is the most popular stock in this table. On the other hand Tata Motors Limited (NYSE:TTM) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Coupa Software Incorporated (NASDAQ:COUP) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th and still beat the market by 1.9 percentage points. Unfortunately COUP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on COUP were disappointed as the stock returned -15% during the first two months of 2020 (through March 9th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
