The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Sprout Social, Inc. (NASDAQ:SPT) based on those filings.
Sprout Social, Inc. (NASDAQ:SPT) was in 16 hedge funds' portfolios at the end of the first quarter of 2020. SPT investors should pay attention to a decrease in hedge fund interest in recent months. There were 19 hedge funds in our database with SPT positions at the end of the previous quarter. Our calculations also showed that SPT 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). 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.
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At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's view the recent hedge fund action regarding Sprout Social, Inc. (NASDAQ:SPT).
What have hedge funds been doing with Sprout Social, Inc. (NASDAQ:SPT)?
At Q1's end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in SPT a year ago. With hedgies' capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, C. Ashton Newhall and James Lim's Greenspring Associates has the biggest position in Sprout Social, Inc. (NASDAQ:SPT), worth close to $48.3 million, corresponding to 20% of its total 13F portfolio. On Greenspring Associates's heels is General Equity Partners, managed by Andrew Bellas, which holds a $17.3 million position; the fund has 11.3% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions encompass Dennis Puri and Oliver Keller's Hunt Lane Capital, Michael Blitzer's Kingstown Capital Management and George McCabe's Portolan Capital Management. In terms of the portfolio weights assigned to each position Greenspring Associates allocated the biggest weight to Sprout Social, Inc. (NASDAQ:SPT), around 19.99% of its 13F portfolio. General Equity Partners is also relatively very bullish on the stock, earmarking 11.3 percent of its 13F equity portfolio to SPT.
Because Sprout Social, Inc. (NASDAQ:SPT) has experienced falling interest from the aggregate hedge fund industry, we can see that there were a few hedge funds that elected to cut their entire stakes in the first quarter. Intriguingly, Anand Parekh's Alyeska Investment Group dumped the biggest stake of the "upper crust" of funds watched by Insider Monkey, valued at about $13.7 million in stock, and Jeffrey Talpins's Element Capital Management was right behind this move, as the fund dropped about $6.4 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 3 funds in the first quarter.
Let's also examine hedge fund activity in other stocks similar to Sprout Social, Inc. (NASDAQ:SPT). These stocks are The Macerich Company (NYSE:MAC), Kite Realty Group Trust (NYSE:KRG), NMI Holdings Inc (NASDAQ:NMIH), and Jack in the Box Inc. (NASDAQ:JACK). 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 MAC,21,41257,-5 KRG,8,39474,-5 NMIH,23,90878,2 JACK,28,158985,2 Average,20,82649,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $108 million in SPT's case. Jack in the Box Inc. (NASDAQ:JACK) is the most popular stock in this table. On the other hand Kite Realty Group Trust (NYSE:KRG) is the least popular one with only 8 bullish hedge fund positions. Sprout Social, Inc. (NASDAQ:SPT) is not the least popular stock in this group but hedge fund interest is still below 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 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on SPT as the stock returned 71.6% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.