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Do Hedge Funds Love Smartsheet Inc. (SMAR)?

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In this article we will take a look at whether hedge funds think Smartsheet Inc. (NYSE:SMAR) 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.

Is Smartsheet Inc. (NYSE:SMAR) undervalued? The smart money was betting on the stock. The number of bullish hedge fund positions rose by 10 lately. Smartsheet Inc. (NYSE:SMAR) was in 49 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 50. Our calculations also showed that SMAR isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

To most stock holders, hedge funds are seen as underperforming, old investment tools of yesteryear. While there are greater than 8000 funds trading at present, We choose to focus on the crème de la crème of this group, approximately 850 funds. These money managers handle the majority of all hedge funds' total asset base, and by tracking their matchless stock picks, Insider Monkey has found various investment strategies that have historically surpassed the S&P 500 index. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website .

Ryan Frick Dorsal Capital
Ryan Frick Dorsal Capital

Ryan Frick of Dorsal Capital

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 we're going to check out the fresh hedge fund action encompassing Smartsheet Inc. (NYSE:SMAR).

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

At the end of the second quarter, a total of 49 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 26% from the first quarter of 2020. By comparison, 47 hedge funds held shares or bullish call options in SMAR a year ago. With the smart money's capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Alkeon Capital Management, managed by Panayotis Takis Sparaggis, holds the number one position in Smartsheet Inc. (NYSE:SMAR). Alkeon Capital Management has a $238.9 million position in the stock, comprising 0.4% of its 13F portfolio. Sitting at the No. 2 spot is Foxhaven Asset Management, managed by Michael Pausic, which holds a $165.8 million position; 4.5% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish include Brian Ashford-Russell and Tim Woolley's Polar Capital, Ken Griffin's Citadel Investment Group and Joel Ramin's 12 West Capital Management. In terms of the portfolio weights assigned to each position Calixto Global Investors allocated the biggest weight to Smartsheet Inc. (NYSE:SMAR), around 19.22% of its 13F portfolio. Cota Capital is also relatively very bullish on the stock, designating 6.4 percent of its 13F equity portfolio to SMAR.

Consequently, key money managers have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, assembled the most outsized position in Smartsheet Inc. (NYSE:SMAR). Point72 Asset Management had $100.4 million invested in the company at the end of the quarter. Ryan Frick and Oliver Evans's Dorsal Capital Management also initiated a $72.3 million position during the quarter. The other funds with new positions in the stock are Stanley Druckenmiller's Duquesne Capital, Robert Smith's Vista Equity Partners, and Spencer M. Waxman's Shannon River Fund Management.

Let's now take a look at hedge fund activity in other stocks similar to Smartsheet Inc. (NYSE:SMAR). We will take a look at Kimco Realty Corp (NYSE:KIM), Globant SA (NYSE:GLOB), Service Corporation International (NYSE:SCI), Phillips 66 Partners LP (NYSE:PSXP), Sealed Air Corporation (NYSE:SEE), Bright Horizons Family Solutions Inc (NYSE:BFAM), and Juniper Networks, Inc. (NYSE:JNPR). This group of stocks' market values are closest to SMAR's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KIM,20,218918,3 GLOB,23,447290,6 SCI,24,527197,1 PSXP,5,36056,0 SEE,28,705369,1 BFAM,17,107496,-1 JNPR,27,355046,-2 Average,20.6,342482,1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.6 hedge funds with bullish positions and the average amount invested in these stocks was $342 million. That figure was $1484 million in SMAR's case. Sealed Air Corporation (NYSE:SEE) is the most popular stock in this table. On the other hand Phillips 66 Partners LP (NYSE:PSXP) is the least popular one with only 5 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 89.4. 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 SMAR wasn't nearly as popular as these 5 stocks and hedge funds that were betting on SMAR were disappointed as the stock returned -4.2% 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.