UiPath Inc. (PATH) Fell Out Of Favor With Hedge Funds

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in UiPath Inc. (NYSE:PATH)? The smart money sentiment can provide an answer to this question.

Is UiPath Inc. (NYSE:PATH) a bargain? The best stock pickers were in a bearish mood. The number of bullish hedge fund bets decreased by 19 recently. UiPath Inc. (NYSE:PATH) was in 27 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 46. Our calculations also showed that PATH 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. Now let’s check out the latest hedge fund action regarding UiPath Inc. (NYSE:PATH).

Chase Coleman of Tiger Global

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

At third quarter’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -41% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PATH over the last 25 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

More specifically, ARK Investment Management was the largest shareholder of UiPath Inc. (NYSE:PATH), with a stake worth $1259.2 million reported as of the end of September. Trailing ARK Investment Management was Alkeon Capital Management, which amassed a stake valued at $660.5 million. Coatue Management, Tiger Global Management LLC, and Altimeter Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Stepstone Group allocated the biggest weight to UiPath Inc. (NYSE:PATH), around 6.32% of its 13F portfolio. ARK Investment Management is also relatively very bullish on the stock, setting aside 3.02 percent of its 13F equity portfolio to PATH.

Seeing as UiPath Inc. (NYSE:PATH) has faced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there were a few hedgies who sold off their positions entirely in the third quarter. Interestingly, Robert Smith’s Vista Equity Partners dumped the largest investment of all the hedgies monitored by Insider Monkey, valued at close to $129.5 million in stock. C. Ashton Newhall and James Lim’s fund, Greenspring Associates, also dumped its stock, about $125.1 million worth. These transactions are interesting, as total hedge fund interest dropped by 19 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as UiPath Inc. (NYSE:PATH) but similarly valued. These stocks are AppLovin Corporation (NASDAQ:APP), Weyerhaeuser Co. (NYSE:WY), Telefonica S.A. (NYSE:TEF), Wayfair Inc (NYSE:W), Carnival Corporation & plc (NYSE:CUK), Arista Networks Inc (NYSE:ANET), and Etsy Inc (NASDAQ:ETSY). This group of stocks’ market values match PATH’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.1 hedge funds with bullish positions and the average amount invested in these stocks was $964 million. That figure was $3629 million in PATH’s case. Etsy Inc (NASDAQ:ETSY) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) is the least popular one with only 5 bullish hedge fund positions. UiPath Inc. (NYSE:PATH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PATH is 29.8. 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 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately PATH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PATH were disappointed as the stock returned -10.6% since the end of September (through 12/9) 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.