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Do Hedge Funds Love Sprout Social, Inc. (SPT)?

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Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Sprout Social, Inc. (NASDAQ:SPT), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is Sprout Social, Inc. (NASDAQ:SPT) a buy here? Money managers were getting less optimistic. The number of bullish hedge fund bets were cut by 6 in recent months. Sprout Social, Inc. (NASDAQ:SPT) was in 24 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 30. Our calculations also showed that SPT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 30 hedge funds in our database with SPT holdings at the end of December.

Today there are a large number of methods market participants have at their disposal to grade their stock investments. A pair of the most under-the-radar methods are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the top money managers can trounce their index-focused peers by a very impressive margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Noam Gottesman GLG Partners
Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. Keeping this in mind let's go over the latest hedge fund action encompassing Sprout Social, Inc. (NASDAQ:SPT).

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

At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the fourth quarter of 2020. By comparison, 16 hedge funds held shares or bullish call options in SPT a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Among these funds, Zevenbergen Capital Investments held the most valuable stake in Sprout Social, Inc. (NASDAQ:SPT), which was worth $51 million at the end of the fourth quarter. On the second spot was 12 West Capital Management which amassed $50.3 million worth of shares. Shannon River Fund Management, Hunt Lane Capital, and Citadel Investment Group 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 Hunt Lane Capital allocated the biggest weight to Sprout Social, Inc. (NASDAQ:SPT), around 6.59% of its 13F portfolio. Diker Management is also relatively very bullish on the stock, setting aside 5.26 percent of its 13F equity portfolio to SPT.

Since Sprout Social, Inc. (NASDAQ:SPT) has witnessed declining sentiment from hedge fund managers, it's easy to see that there exists a select few funds that elected to cut their entire stakes by the end of the first quarter. At the top of the heap, Frank Fu's CaaS Capital said goodbye to the largest position of the "upper crust" of funds monitored by Insider Monkey, totaling close to $11.2 million in stock. Israel Englander's fund, Millennium Management, also cut its stock, about $9.9 million worth. These moves are important to note, as total hedge fund interest dropped by 6 funds by the end of the first quarter.

Let's now review 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 Lexington Realty Trust (NYSE:LXP), Steven Madden, Ltd. (NASDAQ:SHOO), Pacira Biosciences Inc (NASDAQ:PCRX), Antero Resources Corp (NYSE:AR), Acushnet Holdings Corp. (NYSE:GOLF), Alamos Gold Inc (NYSE:AGI), and Cardlytics, Inc. (NASDAQ:CDLX). All of these stocks' market caps resemble SPT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LXP,12,33985,0 SHOO,19,140715,5 PCRX,20,547351,0 AR,33,609879,2 GOLF,19,40986,6 AGI,22,267948,5 CDLX,38,1012610,6 Average,23.3,379068,3.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.3 hedge funds with bullish positions and the average amount invested in these stocks was $379 million. That figure was $283 million in SPT's case. Cardlytics, Inc. (NASDAQ:CDLX) is the most popular stock in this table. On the other hand Lexington Realty Trust (NYSE:LXP) is the least popular one with only 12 bullish hedge fund positions. Sprout Social, Inc. (NASDAQ:SPT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SPT is 46.1. 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. 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 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Hedge funds were also right about betting on SPT as the stock returned 43.7% since the end of Q1 (through 7/16) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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