Here is What Hedge Funds Think About Spotify Technology S.A. (SPOT)

In this article we will take a look at whether hedge funds think Spotify Technology S.A. (NYSE:SPOT) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Spotify Technology S.A. (NYSE:SPOT) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 48 hedge funds’ portfolios at the end of the third quarter of 2021. 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. Keeping this in mind we’re going to take a peek at the recent hedge fund action regarding Spotify Technology S.A. (NYSE:SPOT).

Chase Coleman of Tiger Global

Do Hedge Funds Think SPOT Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SPOT over the last 25 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

The largest stake in Spotify Technology S.A. (NYSE:SPOT) was held by ARK Investment Management, which reported holding $1039.7 million worth of stock at the end of September. It was followed by Tiger Global Management LLC with a $597.5 million position. Other investors bullish on the company included Citadel Investment Group, GLG Partners, 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 10.58% of its 13F portfolio. Thunderbird Partners is also relatively very bullish on the stock, setting aside 9.41 percent of its 13F equity portfolio to SPOT.

Because Spotify Technology S.A. (NYSE:SPOT) has witnessed a decline in interest from the smart money, it’s easy to see that there is a sect of money managers that slashed their full holdings in the third quarter. At the top of the heap, Anand Parekh’s Alyeska Investment Group dumped the largest investment of all the hedgies monitored by Insider Monkey, comprising about $31.7 million in stock, and Michael R. Weisberg’s Crestwood Capital Management was right behind this move, as the fund dropped about $8.5 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out 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 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 are closest to SPOT’s market cap.

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 28.6% in 2021 through November 30th 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 5.8% since the end of September (through 11/30) 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.

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Disclosure: None. This article was originally published at Insider Monkey.