The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don't follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That's why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at HubSpot Inc (NYSE:HUBS) from the perspective of those elite funds.
HubSpot Inc (NYSE:HUBS) investors should pay attention to an increase in hedge fund sentiment of late. HUBS was in 33 hedge funds' portfolios at the end of the second quarter of 2019. There were 29 hedge funds in our database with HUBS positions at the end of the previous quarter. Our calculations also showed that HUBS isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a peek at the latest hedge fund action regarding HubSpot Inc (NYSE:HUBS).
How are hedge funds trading HubSpot Inc (NYSE:HUBS)?
At Q2's end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HUBS over the last 16 quarters. With hedgies' sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, SCGE Management was the largest shareholder of HubSpot Inc (NYSE:HUBS), with a stake worth $136.2 million reported as of the end of March. Trailing SCGE Management was Two Sigma Advisors, which amassed a stake valued at $113.5 million. Renaissance Technologies, Alkeon Capital Management, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, key money managers were breaking ground themselves. Cat Rock Capital, managed by Alexander Captain, initiated the most valuable position in HubSpot Inc (NYSE:HUBS). Cat Rock Capital had $13.2 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $9.2 million position during the quarter. The other funds with brand new HUBS positions are Mark N. Diker's Diker Management, Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners, and Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as HubSpot Inc (NYSE:HUBS) but similarly valued. We will take a look at AngloGold Ashanti Limited (NYSE:AU), Genpact Limited (NYSE:G), L Brands Inc (NYSE:LB), and Ceridian HCM Holding Inc. (NYSE:CDAY). This group of stocks' market values match HUBS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AU,16,479675,-7 G,26,744096,-3 LB,30,644900,-2 CDAY,22,845775,-8 Average,23.5,678612,-5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $679 million. That figure was $693 million in HUBS's case. L Brands Inc (NYSE:LB) is the most popular stock in this table. On the other hand AngloGold Ashanti Limited (NYSE:AU) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks HubSpot Inc (NYSE:HUBS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately HUBS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HUBS were disappointed as the stock returned -11.1% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.