Is Smartsheet (SMAR) Stock A Buy or Sell?

In this article you are going to find out whether hedge funds think Smartsheet Inc. (NYSE:SMAR) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is SMAR stock a buy or sell? Hedge fund interest in Smartsheet Inc. (NYSE:SMAR) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SMAR isn’t among the 30 most popular stocks among hedge funds (click for Q4 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 Ozon Holdings PLC (NASDAQ:OZON), RenaissanceRe Holdings Ltd. (NYSE:RNR), and Lamar Advertising Company (REIT) (NASDAQ:LAMR) to gather more data points.

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 124 percentage points since March 2017 (see the details here).

Colin Moran of Abdiel Capital Advisors

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

At fourth quarter’s end, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SMAR over the last 22 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.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Joel Ramin’s 12 West Capital Management has the most valuable position in Smartsheet Inc. (NYSE:SMAR), worth close to $245.1 million, corresponding to 10.5% of its total 13F portfolio. The second largest stake is held by Michael Pausic of Foxhaven Asset Management, with a $215.8 million position; the fund has 5.7% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions include Colin Moran’s Abdiel Capital Advisors, Alex Sacerdote’s Whale Rock Capital Management and Panayotis Takis Sparaggis’s Alkeon Capital Management. In terms of the portfolio weights assigned to each position Jeneq Management allocated the biggest weight to Smartsheet Inc. (NYSE:SMAR), around 10.91% of its 13F portfolio. Calixto Global Investors is also relatively very bullish on the stock, setting aside 10.83 percent of its 13F equity portfolio to SMAR.

Because Smartsheet Inc. (NYSE:SMAR) has faced declining sentiment from the smart money, it’s safe to say that there was a specific group of fund managers that slashed their entire stakes heading into Q1. It’s worth mentioning that Philippe Laffont’s Coatue Management dropped the biggest position of the “upper crust” of funds monitored by Insider Monkey, totaling close to $221.8 million in stock, and Daniel Sundheim’s D1 Capital Partners was right behind this move, as the fund dropped about $170.2 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks similar to Smartsheet Inc. (NYSE:SMAR). These stocks are Ozon Holdings PLC (NASDAQ:OZON), RenaissanceRe Holdings Ltd. (NYSE:RNR), Lamar Advertising Company (REIT) (NASDAQ:LAMR), Inphi Corporation (NASDAQ:IPHI), Carlisle Companies, Inc. (NYSE:CSL), Gentex Corporation (NASDAQ:GNTX), and Albertsons Companies, Inc. (NYSE:ACI). This group of stocks’ market valuations are closest to SMAR’s market valuation.

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As you can see these stocks had an average of 28.9 hedge funds with bullish positions and the average amount invested in these stocks was $891 million. That figure was $1723 million in SMAR’s case. RenaissanceRe Holdings Ltd. (NYSE:RNR) is the most popular stock in this table. On the other hand Carlisle Companies, Inc. (NYSE:CSL) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Smartsheet Inc. (NYSE:SMAR) is more popular among hedge funds. Our overall hedge fund sentiment score for SMAR is 82. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Unfortunately SMAR wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on SMAR were disappointed as the stock returned -9.7% since the end of the fourth quarter (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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