Did Hedge Funds Make The Right Call On Upland Software Inc (UPLD) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Upland Software Inc (NASDAQ:UPLD) and determine whether hedge funds skillfully traded this stock.

Is Upland Software Inc (NASDAQ:UPLD) undervalued? The smart money was in a pessimistic mood. The number of bullish hedge fund positions went down by 5 lately. Our calculations also showed that UPLD 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.

To most market participants, hedge funds are seen as underperforming, old investment vehicles of yesteryear. While there are over 8000 funds trading today, Our researchers choose to focus on the crème de la crème of this group, around 850 funds. Most estimates calculate that this group of people have their hands on the lion’s share of the hedge fund industry’s total asset base, and by shadowing their finest stock picks, Insider Monkey has figured out a number of investment strategies that have historically exceeded the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced 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 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

William Martin Raging Capital Management

William Martin of Raging Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to go over the latest hedge fund action encompassing Upland Software Inc (NASDAQ:UPLD).

Hedge fund activity in Upland Software Inc (NASDAQ:UPLD)

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from one quarter earlier. By comparison, 28 hedge funds held shares or bullish call options in UPLD a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is UPLD A Good Stock To Buy?

More specifically, Portolan Capital Management was the largest shareholder of Upland Software Inc (NASDAQ:UPLD), with a stake worth $26.9 million reported as of the end of September. Trailing Portolan Capital Management was Royce & Associates, which amassed a stake valued at $21.5 million. General Equity Partners, G2 Investment Partners Management, and Nantahala Capital Management 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 General Equity Partners allocated the biggest weight to Upland Software Inc (NASDAQ:UPLD), around 12.58% of its 13F portfolio. Dorset Management is also relatively very bullish on the stock, designating 6.99 percent of its 13F equity portfolio to UPLD.

Because Upland Software Inc (NASDAQ:UPLD) has experienced bearish sentiment from hedge fund managers, logic holds that there lies a certain “tier” of fund managers who sold off their full holdings last quarter. At the top of the heap, William C. Martin’s Raging Capital Management said goodbye to the largest position of the 750 funds tracked by Insider Monkey, valued at close to $19.4 million in stock. Ben Gordon’s fund, Blue Grotto Capital, also cut its stock, about $10.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 5 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Upland Software Inc (NASDAQ:UPLD) but similarly valued. We will take a look at Qiwi PLC (NASDAQ:QIWI), Gossamer Bio, Inc. (NASDAQ:GOSS), NetGear, Inc. (NASDAQ:NTGR), and Kadmon Holdings, Inc. (NYSE:KDMN). All of these stocks’ market caps are closest to UPLD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
QIWI 11 42137 1
GOSS 10 80706 -2
NTGR 13 31992 -3
KDMN 28 307150 3
Average 15.5 115496 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $115 million. That figure was $144 million in UPLD’s case. Kadmon Holdings, Inc. (NYSE:KDMN) is the most popular stock in this table. On the other hand Gossamer Bio, Inc. (NASDAQ:GOSS) is the least popular one with only 10 bullish hedge fund positions. Upland Software Inc (NASDAQ:UPLD) is not the most popular stock in this group but hedge fund interest is still above 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 18.6% in 2020 through July 27th but still beat the market by 17.1 percentage points. Hedge funds were also right about betting on UPLD, though not to the same extent, as the stock returned 29.4% since the end of March and outperformed the market as well.

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