Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like HubSpot Inc (NYSE:HUBS).
Is HubSpot Inc (NYSE:HUBS) a buy right now? The smart money is betting on the stock. The number of long hedge fund bets rose by 5 recently. HUBS was in 24 hedge funds’ portfolios at the end of the third quarter of 2016. There were 19 hedge funds in our database with HUBS positions at the end of the previous quarter. 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 Proto Labs Inc (NYSE:PRLB), Exponent, Inc. (NASDAQ:EXPO), and Children’s Place Retail Stores, Inc. (NASDAQ:PLCE) to gather more data points.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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What have hedge funds been doing with HubSpot Inc (NYSE:HUBS)?
Heading into the fourth quarter of 2016, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a 26% jump from the second quarter of 2016. Hedge fund ownership of HUBS has risen during each of the last 4 quarters, more than doubling during that time. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, holds the largest position in HubSpot Inc (NYSE:HUBS). Polar Capital has a $26.3 million position in the stock. The second largest stake is held by Glen Kacher of Light Street Capital, with a $24.2 million position; 2.4% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism consist of Eduardo Costa’s Calixto Global Investors, Bruce Garelick’s Garelick Capital Partners and John Overdeck and David Siegel’s Two Sigma Advisors.
As one would reasonably expect, specific money managers have jumped into HubSpot Inc (NYSE:HUBS) headfirst. Two Sigma Advisors assembled the most outsized position in HubSpot Inc (NYSE:HUBS). Two Sigma Advisors had $8.7 million invested in the company at the end of the quarter. Christopher Lord’s Criterion Capital also made a $6.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Charles Clough’s Clough Capital Partners, Glenn Russell Dubin’s Highbridge Capital Management, and Philip Hempleman’s Ardsley Partners.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as HubSpot Inc (NYSE:HUBS) but similarly valued. These stocks are Proto Labs Inc (NYSE:PRLB), Exponent, Inc. (NASDAQ:EXPO), Children’s Place Retail Stores, Inc. (NASDAQ:PLCE), and G&K Services Inc (NASDAQ:GK). This group of stocks’ market valuations resemble HUBS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PRLB | 9 | 96825 | -2 |
| EXPO | 8 | 60977 | -1 |
| PLCE | 22 | 216244 | -7 |
| GK | 11 | 169989 | 0 |
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $136 million. That figure was $135 million in HUBS’s case. Children’s Place Retail Stores, Inc. (NASDAQ:PLCE) is the most popular stock in this table. On the other hand Exponent, Inc. (NASDAQ:EXPO) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks HubSpot Inc (NYSE:HUBS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers and continue to grow more confident in it, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None
