In this article we will take a look at whether hedge funds think SharpSpring, Inc. (NASDAQ:SHSP) 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 SharpSpring, Inc. (NASDAQ:SHSP) a safe investment now? Hedge funds are in a bearish mood. The number of bullish hedge fund positions retreated by 2 in recent months. Our calculations also showed that SHSP isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). SHSP was in 5 hedge funds' portfolios at the end of March. There were 7 hedge funds in our database with SHSP positions at the end of the previous quarter. Video: 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 a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_193003" align="aligncenter" width="400"] Chuck Royce of Royce & Associates[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a glance at the latest hedge fund action encompassing SharpSpring, Inc. (NASDAQ:SHSP).
What have hedge funds been doing with SharpSpring, Inc. (NASDAQ:SHSP)?
At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SHSP over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Among these funds, Cat Rock Capital held the most valuable stake in SharpSpring, Inc. (NASDAQ:SHSP), which was worth $8.2 million at the end of the third quarter. On the second spot was Greenhaven Road Investment Management which amassed $6.6 million worth of shares. Manatuck Hill Partners, Royce & Associates, and Springbok Capital 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 Greenhaven Road Investment Management allocated the biggest weight to SharpSpring, Inc. (NASDAQ:SHSP), around 8.22% of its 13F portfolio. Cat Rock Capital is also relatively very bullish on the stock, designating 0.99 percent of its 13F equity portfolio to SHSP.
Because SharpSpring, Inc. (NASDAQ:SHSP) has faced a decline in interest from the smart money, logic holds that there were a few funds that decided to sell off their positions entirely by the end of the first quarter. At the top of the heap, Mark McMeans's Brasada Capital Management said goodbye to the biggest position of all the hedgies tracked by Insider Monkey, totaling close to $0.8 million in stock. Cliff Asness's fund, AQR Capital Management, also sold off its stock, about $0.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 2 funds by the end of the first quarter.
Let's check out hedge fund activity in other stocks similar to SharpSpring, Inc. (NASDAQ:SHSP). These stocks are S&W Seed Company (NASDAQ:SANW), Magal Security Systems Ltd. (NASDAQ:MAGS), Universal Stainless & Alloy Products (NASDAQ:USAP), and Sundial Growers Inc. (NASDAQ:SNDL). This group of stocks' market caps are closest to SHSP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SANW,5,42982,-1 MAGS,2,1886,0 USAP,6,12894,0 SNDL,4,1465,0 Average,4.25,14807,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.25 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $16 million in SHSP's case. Universal Stainless & Alloy Products (NASDAQ:USAP) is the most popular stock in this table. On the other hand Magal Security Systems Ltd. (NASDAQ:MAGS) is the least popular one with only 2 bullish hedge fund positions. SharpSpring, Inc. (NASDAQ:SHSP) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on SHSP as the stock returned 63.4% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.