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Were Hedge Funds Right About Coupa Software Incorporated (COUP)?

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·6 min read
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  • COUP

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Coupa Software Incorporated (NASDAQ:COUP).

Coupa Software Incorporated (NASDAQ:COUP) investors should pay attention to an increase in hedge fund interest lately. Coupa Software Incorporated (NASDAQ:COUP) was in 54 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 66. Our calculations also showed that COUP isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ole Andreas Halvorsen Viking Global
Ole Andreas Halvorsen Viking Global

Ole Andreas Halvorsen of Viking Global

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we're going to check out the key hedge fund action regarding Coupa Software Incorporated (NASDAQ:COUP).

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

At second quarter's end, a total of 54 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the first quarter of 2020. On the other hand, there were a total of 50 hedge funds with a bullish position in COUP a year ago. With hedge funds' capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Is COUP A Good Stock To Buy?
Is COUP A Good Stock To Buy?

Among these funds, Lone Pine Capital held the most valuable stake in Coupa Software Incorporated (NASDAQ:COUP), which was worth $1224 million at the end of the second quarter. On the second spot was Viking Global which amassed $943.6 million worth of shares. Alkeon Capital Management, Tiger Global Management LLC, and SoMa Equity Partners 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 Pelham Capital allocated the biggest weight to Coupa Software Incorporated (NASDAQ:COUP), around 8.23% of its 13F portfolio. SoMa Equity Partners is also relatively very bullish on the stock, designating 5.12 percent of its 13F equity portfolio to COUP.

As industrywide interest jumped, key money managers have been driving this bullishness. Tybourne Capital Management, managed by Eashwar Krishnan, assembled the largest position in Coupa Software Incorporated (NASDAQ:COUP). Tybourne Capital Management had $201.9 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley's Polar Capital also initiated a $69.2 million position during the quarter. The other funds with brand new COUP positions are Spencer M. Waxman's Shannon River Fund Management, Jay Chen's Himension Capital, and Mikal Patel's Oribel Capital Management.

Let's now review hedge fund activity in other stocks similar to Coupa Software Incorporated (NASDAQ:COUP). We will take a look at KB Financial Group, Inc. (NYSE:KB), Bio-Rad Laboratories, Inc. (NYSE:BIO), Live Nation Entertainment, Inc. (NYSE:LYV), Darden Restaurants, Inc. (NYSE:DRI), Smith & Nephew plc (NYSE:SNN), Hewlett Packard Enterprise Company (NYSE:HPE), and Akamai Technologies, Inc. (NASDAQ:AKAM). This group of stocks' market values resemble COUP's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KB,8,26390,-1 BIO,41,1292583,-3 LYV,40,881860,3 DRI,44,890301,-5 SNN,13,119901,2 HPE,34,1015096,7 AKAM,30,273261,5 Average,30,642770,1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $643 million. That figure was $4698 million in COUP's case. Darden Restaurants, Inc. (NYSE:DRI) is the most popular stock in this table. On the other hand KB Financial Group, Inc. (NYSE:KB) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Coupa Software Incorporated (NASDAQ:COUP) is more popular among hedge funds. Our overall hedge fund sentiment score for COUP is 83.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. Unfortunately COUP wasn't nearly as popular as these 5 stocks and hedge funds that were betting on COUP were disappointed as the stock returned -11.1% since the end of the second quarter (through 11/5) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.