Here is What Hedge Funds Think About Sprout Social, Inc. (SPT)

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Sprout Social, Inc. (NASDAQ:SPT) to find out whether there were any major changes in hedge funds’ views.

Sprout Social, Inc. (NASDAQ:SPT) was in 29 hedge funds’ portfolios at the end of September. The all time high for this statistic is 30. SPT has seen an increase in hedge fund sentiment of late. There were 25 hedge funds in our database with SPT positions at the end of the second quarter. Our calculations also showed that SPT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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 analyze the fresh hedge fund action regarding Sprout Social, Inc. (NASDAQ:SPT).

Joel Greenblatt of Gotham Asset Management

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

At the end of the third quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in SPT a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Nancy Zevenbergen’s Zevenbergen Capital Investments has the largest position in Sprout Social, Inc. (NASDAQ:SPT), worth close to $153.5 million, amounting to 2.9% of its total 13F portfolio. The second most bullish fund manager is 12 West Capital Management, led by Joel Ramin, holding a $86.4 million position; 3.9% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish comprise Spencer M. Waxman’s Shannon River Fund Management, Richard Driehaus’s Driehaus Capital and Jeffrey Hoffner’s Engle Capital. In terms of the portfolio weights assigned to each position Engle Capital allocated the biggest weight to Sprout Social, Inc. (NASDAQ:SPT), around 7.51% of its 13F portfolio. Diker Management is also relatively very bullish on the stock, earmarking 7.49 percent of its 13F equity portfolio to SPT.

As industrywide interest jumped, some big names have been driving this bullishness. Engle Capital, managed by Jeffrey Hoffner, established the largest position in Sprout Social, Inc. (NASDAQ:SPT). Engle Capital had $45.4 million invested in the company at the end of the quarter. Renaissance Technologies also made a $14.6 million investment in the stock during the quarter. The following funds were also among the new SPT investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Joel Greenblatt’s Gotham Asset Management, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Sprout Social, Inc. (NASDAQ:SPT) but similarly valued. We will take a look at RenaissanceRe Holdings Ltd. (NYSE:RNR), Brixmor Property Group Inc (NYSE:BRX), Skechers USA Inc (NYSE:SKX), Planet Fitness Inc (NYSE:PLNT), Change Healthcare Inc. (NASDAQ:CHNG), Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR), and Virgin Galactic Holdings, Inc. (NYSE:SPCE). This group of stocks’ market values are closest to SPT’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.4 hedge funds with bullish positions and the average amount invested in these stocks was $685 million. That figure was $595 million in SPT’s case. Change Healthcare Inc. (NASDAQ:CHNG) is the most popular stock in this table. On the other hand Virgin Galactic Holdings, Inc. (NYSE:SPCE) is the least popular one with only 16 bullish hedge fund positions. Sprout Social, Inc. (NASDAQ:SPT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SPT is 57.1. 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 negative signal and 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 surpassed the market again by 5.6 percentage points. Unfortunately SPT wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SPT investors were disappointed as the stock returned -8.4% 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 most of these stocks already outperformed the market in 2021.

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