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In this article we will check out the progression of hedge fund sentiment towards Smartsheet Inc. (NYSE:SMAR) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is SMAR a good stock to buy now? Smartsheet Inc. (NYSE:SMAR) was in 45 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 50. SMAR has experienced a decrease in enthusiasm from smart money recently. There were 47 hedge funds in our database with SMAR positions at the end of the second quarter. Our calculations also showed that SMAR isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most investors, hedge funds are perceived as unimportant, outdated financial vehicles of the past. While there are more than 8000 funds in operation today, We look at the masters of this club, about 850 funds. Most estimates calculate that this group of people administer the majority of the hedge fund industry's total asset base, and by watching their finest stock picks, Insider Monkey has identified numerous investment strategies that have historically outrun the market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
Philippe Laffont of Coatue Management
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Do Hedge Funds Think SMAR Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 45 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the previous quarter. By comparison, 50 hedge funds held shares or bullish call options in SMAR a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in Smartsheet Inc. (NYSE:SMAR) was held by Coatue Management, which reported holding $221.8 million worth of stock at the end of September. It was followed by Tiger Global Management LLC with a $204.9 million position. Other investors bullish on the company included 12 West Capital Management, D1 Capital Partners, and Foxhaven Asset Management. In terms of the portfolio weights assigned to each position North Peak Capital allocated the biggest weight to Smartsheet Inc. (NYSE:SMAR), around 11.38% of its 13F portfolio. 12 West Capital Management is also relatively very bullish on the stock, setting aside 8.51 percent of its 13F equity portfolio to SMAR.
Because Smartsheet Inc. (NYSE:SMAR) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of money managers that slashed their full holdings in the third quarter. Interestingly, Alex Sacerdote's Whale Rock Capital Management dropped the biggest stake of the "upper crust" of funds monitored by Insider Monkey, worth an estimated $284.6 million in stock, and Glen Kacher's Light Street Capital was right behind this move, as the fund said goodbye to about $40.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds in the third quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Smartsheet Inc. (NYSE:SMAR) but similarly valued. We will take a look at Dada Nexus Limited (NASDAQ:DADA), Duck Creek Technologies, Inc. (NASDAQ:DCT), American Financial Group (NYSE:AFG), Ares Capital Corporation (NASDAQ:ARCC), RealPage, Inc. (NASDAQ:RP), CRISPR Therapeutics AG (NASDAQ:CRSP), and Donaldson Company, Inc. (NYSE:DCI). This group of stocks' market caps are similar to SMAR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DADA,17,113051,0 DCT,21,222561,21 AFG,27,278715,-1 ARCC,22,106925,3 RP,39,835449,0 CRSP,26,405098,-5 DCI,30,286675,3 Average,26,321211,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $321 million. That figure was $1662 million in SMAR's case. RealPage, Inc. (NASDAQ:RP) is the most popular stock in this table. On the other hand Dada Nexus Limited (NASDAQ:DADA) is the least popular one with only 17 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 80. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 32.9% in 2020 through December 8th but still managed to beat the market by 16.2 percentage points. Hedge funds were also right about betting on SMAR as the stock returned 40.3% since the end of September (through 12/8) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.