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Is SPT Stock A Buy?

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·5 min read
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At Insider Monkey, we pore over the filings of nearly 887 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of December 31st. In this article, we will use that wealth of knowledge to determine whether or not Sprout Social, Inc. (NASDAQ:SPT) makes for a good investment right now.

Is SPT stock a buy? Sprout Social, Inc. (NASDAQ:SPT) was in 30 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 19. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. SPT has seen an increase in support from the world's most elite money managers recently. There were 18 hedge funds in our database with SPT holdings at the end of September. Our calculations also showed that SPT isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Today there are tons of metrics shareholders have at their disposal to size up stocks. A pair of the best metrics are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the elite money managers can beat the market by a significant amount (see the details here).

Michael Gelband of ExodusPoint Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. With all of this in mind let's take a look at the fresh hedge fund action surrounding Sprout Social, Inc. (NASDAQ:SPT).

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

At the end of December, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 67% from the third quarter of 2020. On the other hand, there were a total of 19 hedge funds with a bullish position in SPT a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Sprout Social, Inc. (NASDAQ:SPT) was held by 12 West Capital Management, which reported holding $46.7 million worth of stock at the end of December. It was followed by Zevenbergen Capital Investments with a $35.3 million position. Other investors bullish on the company included Shannon River Fund Management, Hunt Lane Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Collaborative Holdings Management allocated the biggest weight to Sprout Social, Inc. (NASDAQ:SPT), around 5.58% of its 13F portfolio. Hunt Lane Capital is also relatively very bullish on the stock, dishing out 5.43 percent of its 13F equity portfolio to SPT.

Consequently, key money managers were leading the bulls' herd. Shannon River Fund Management, managed by Spencer M. Waxman, assembled the most valuable position in Sprout Social, Inc. (NASDAQ:SPT). Shannon River Fund Management had $32.5 million invested in the company at the end of the quarter. Frank Fu's CaaS Capital also initiated a $11.2 million position during the quarter. The other funds with new positions in the stock are Richard Driehaus's Driehaus Capital, Sheetal Sharma's Collaborative Holdings Management, and Michael Gelband's ExodusPoint Capital.

Let's also examine hedge fund activity in other stocks similar to Sprout Social, Inc. (NASDAQ:SPT). We will take a look at Group 1 Automotive, Inc. (NYSE:GPI), TreeHouse Foods Inc. (NYSE:THS), Burning Rock Biotech Limited (NASDAQ:BNR), Phreesia, Inc. (NYSE:PHR), Chimera Investment Corporation (NYSE:CIM), Accolade, Inc. (NASDAQ:ACCD), and Spirit Airlines Incorporated (NYSE:SAVE). All of these stocks' market caps are closest to SPT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GPI,20,263187,-4 THS,24,219265,-6 BNR,12,177719,1 PHR,26,250171,4 CIM,16,79263,-4 ACCD,21,256654,10 SAVE,23,213678,-4 Average,20.3,208562,-0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.3 hedge funds with bullish positions and the average amount invested in these stocks was $209 million. That figure was $258 million in SPT's case. Phreesia, Inc. (NYSE:PHR) is the most popular stock in this table. On the other hand Burning Rock Biotech Limited (NASDAQ:BNR) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Sprout Social, Inc. (NASDAQ:SPT) is more popular among hedge funds. Our overall hedge fund sentiment score for SPT is 90. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 12.2% in 2021 through April 12th but still managed to beat the market by 1.5 percentage points. Hedge funds were also right about betting on SPT as the stock returned 30.9% since the end of December (through 4/12) 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.

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