In this article we will take a look at whether hedge funds think Upwork Inc. (NASDAQ:UPWK) 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.
Upwork Inc. (NASDAQ:UPWK) shareholders have witnessed a decrease in hedge fund sentiment of late. UPWK was in 22 hedge funds' portfolios at the end of March. There were 24 hedge funds in our database with UPWK positions at the end of the previous quarter. Our calculations also showed that UPWK 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_671014" align="aligncenter" width="399"] David Brown of Hawk Ridge Management[/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 trades like this one. 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. With all of this in mind let's check out the key hedge fund action regarding Upwork Inc. (NASDAQ:UPWK).
How have hedgies been trading Upwork Inc. (NASDAQ:UPWK)?
At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in UPWK over the last 18 quarters. With the smart money's sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Ancient Art (Teton Capital) was the largest shareholder of Upwork Inc. (NASDAQ:UPWK), with a stake worth $36 million reported as of the end of September. Trailing Ancient Art (Teton Capital) was Hawk Ridge Management, which amassed a stake valued at $27.1 million. Renaissance Technologies, Millennium Management, and Two Sigma Advisors 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 Ancient Art (Teton Capital) allocated the biggest weight to Upwork Inc. (NASDAQ:UPWK), around 5.8% of its 13F portfolio. Hawk Ridge Management is also relatively very bullish on the stock, setting aside 4.57 percent of its 13F equity portfolio to UPWK.
Seeing as Upwork Inc. (NASDAQ:UPWK) has experienced bearish sentiment from the smart money, it's easy to see that there were a few fund managers who were dropping their full holdings heading into Q4. Intriguingly, Sharlyn C. Heslam's Stockbridge Partners dropped the largest investment of the "upper crust" of funds monitored by Insider Monkey, worth an estimated $56.9 million in stock, and Matt Sirovich and Jeremy Mindich's Scopia Capital was right behind this move, as the fund dumped about $40.5 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 2 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Upwork Inc. (NASDAQ:UPWK) but similarly valued. These stocks are German American Bancorp., Inc. (NASDAQ:GABC), Orchard Therapeutics plc (NASDAQ:ORTX), Ingles Markets, Incorporated (NASDAQ:IMKTA), and OneSpan Inc. (NASDAQ:OSPN). This group of stocks' market values resemble UPWK's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GABC,4,10399,-1 ORTX,19,200945,-3 IMKTA,11,53738,-2 OSPN,13,63457,0 Average,11.75,82135,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was $108 million in UPWK's case. Orchard Therapeutics plc (NASDAQ:ORTX) is the most popular stock in this table. On the other hand German American Bancorp., Inc. (NASDAQ:GABC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Upwork Inc. (NASDAQ:UPWK) is more popular among hedge funds. 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 returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on UPWK as the stock returned 92.6% so far in Q2 (through June 10th) 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.
Disclosure: None. This article was originally published at Insider Monkey.