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Do Hedge Funds Love Coupa Software Incorporated (COUP)?

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  • COUP

The Insider Monkey team has completed processing the quarterly 13F filings for the June quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Coupa Software Incorporated (NASDAQ:COUP).

Coupa Software Incorporated (NASDAQ:COUP) shareholders have witnessed an increase in hedge fund interest lately. Coupa Software Incorporated (NASDAQ:COUP) was in 54 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 66. Our calculations also showed that COUP isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Ole Andreas Halvorsen Viking Global
Ole Andreas Halvorsen Viking Global

Ole Andreas Halvorsen of Viking Global

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let's take a glance at the new hedge fund action surrounding Coupa Software Incorporated (NASDAQ:COUP).

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

Heading into the third quarter of 2021, a total of 54 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. By comparison, 50 hedge funds held shares or bullish call options in COUP a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

More specifically, Lone Pine Capital was the largest shareholder of Coupa Software Incorporated (NASDAQ:COUP), with a stake worth $1224 million reported as of the end of June. Trailing Lone Pine Capital was Viking Global, which amassed a stake valued at $943.6 million. Alkeon Capital Management, Tiger Global Management LLC, and SoMa Equity Partners 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 Pelham Capital allocated the biggest weight to Coupa Software Incorporated (NASDAQ:COUP), around 8.23% of its 13F portfolio. SoMa Equity Partners is also relatively very bullish on the stock, designating 5.12 percent of its 13F equity portfolio to COUP.

Now, key hedge funds were breaking ground themselves. Tybourne Capital Management, managed by Eashwar Krishnan, created the most valuable position in Coupa Software Incorporated (NASDAQ:COUP). Tybourne Capital Management had $201.9 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley's Polar Capital also made a $69.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Spencer M. Waxman's Shannon River Fund Management, Jay Chen's Himension Capital, and Mikal Patel's Oribel Capital Management.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Coupa Software Incorporated (NASDAQ:COUP) but similarly valued. These stocks are KB Financial Group, Inc. (NYSE:KB), Bio-Rad Laboratories, Inc. (NYSE:BIO), Live Nation Entertainment, Inc. (NYSE:LYV), Darden Restaurants, Inc. (NYSE:DRI), Smith & Nephew plc (NYSE:SNN), Hewlett Packard Enterprise Company (NYSE:HPE), and Akamai Technologies, Inc. (NASDAQ:AKAM). This group of stocks' market values are similar to COUP's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KB,8,26390,-1 BIO,41,1292583,-3 LYV,40,881860,3 DRI,44,890301,-5 SNN,13,119901,2 HPE,34,1015096,7 AKAM,30,273261,5 Average,30,642770,1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $643 million. That figure was $4698 million in COUP's case. Darden Restaurants, Inc. (NYSE:DRI) is the most popular stock in this table. On the other hand KB Financial Group, Inc. (NYSE:KB) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Coupa Software Incorporated (NASDAQ:COUP) is more popular among hedge funds. Our overall hedge fund sentiment score for COUP is 83.5. 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 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 22.9% in 2021 through October 1st and still beat the market by 5.6 percentage points. Unfortunately COUP wasn't nearly as popular as these 5 stocks and hedge funds that were betting on COUP were disappointed as the stock returned -15.6% since the end of the second quarter (through 10/1) 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 since 2019.

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