We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. In this article we are going to take a look at smart money sentiment towards HubSpot Inc (NYSE:HUBS).
HubSpot Inc (NYSE:HUBS) was in 30 hedge funds’ portfolios at the end of December. HUBS has seen a decrease in hedge fund interest of late. There were 36 hedge funds in our database with HUBS positions at the end of the previous quarter. Our calculations also showed that HUBS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Stephen Mandel of Lone Pine Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the recent hedge fund action regarding HubSpot Inc (NYSE:HUBS).
How are hedge funds trading HubSpot Inc (NYSE:HUBS)?
At the end of the fourth quarter, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HUBS over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
The largest stake in HubSpot Inc (NYSE:HUBS) was held by Citadel Investment Group, which reported holding $170.2 million worth of stock at the end of September. It was followed by SCGE Management with a $162.6 million position. Other investors bullish on the company included Two Sigma Advisors, Polar Capital, and Lone Pine Capital. In terms of the portfolio weights assigned to each position Diker Management allocated the biggest weight to HubSpot Inc (NYSE:HUBS), around 8.57% of its 13F portfolio. SCGE Management is also relatively very bullish on the stock, dishing out 6.57 percent of its 13F equity portfolio to HUBS.
Judging by the fact that HubSpot Inc (NYSE:HUBS) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few fund managers who sold off their full holdings last quarter. It’s worth mentioning that Panayotis Takis Sparaggis’s Alkeon Capital Management dropped the largest investment of all the hedgies tracked by Insider Monkey, worth about $144 million in stock. Renaissance Technologies, also dropped its stock, about $47.8 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 6 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to HubSpot Inc (NYSE:HUBS). We will take a look at Horizon Pharma Public Limited Company (NASDAQ:HZNP), AECOM (NYSE:ACM), Columbia Sportswear Company (NASDAQ:COLM), and Skechers USA Inc (NYSE:SKX). This group of stocks’ market valuations are similar to HUBS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HZNP | 33 | 1859526 | 0 |
| ACM | 36 | 1125310 | 9 |
| COLM | 23 | 135440 | -6 |
| SKX | 30 | 653184 | 2 |
| Average | 30.5 | 943365 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $943 million. That figure was $652 million in HUBS’s case. AECOM (NYSE:ACM) is the most popular stock in this table. On the other hand Columbia Sportswear Company (NASDAQ:COLM) is the least popular one with only 23 bullish hedge fund positions. HubSpot Inc (NYSE:HUBS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately HUBS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); HUBS investors were disappointed as the stock returned -30.6% during the same time period 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.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
