Hedge Funds Are Cashing Out Of Upwork Inc. (UPWK)

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended March 31st, so let’s proceed with the discussion of the hedge fund sentiment on Upwork Inc. (NASDAQ:UPWK).

Is Upwork Inc. (NASDAQ:UPWK) a bargain? Money managers were in a bearish mood. The number of bullish hedge fund bets went down by 2 recently. Upwork Inc. (NASDAQ:UPWK) was in 32 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 34. Our calculations also showed that UPWK isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Brown Hawk Ridge Partners

David Brown of Hawk Ridge Management

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

At first quarter’s end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the previous quarter. On the other hand, there were a total of 22 hedge funds with a bullish position in UPWK a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, SRS Investment Management held the most valuable stake in Upwork Inc. (NASDAQ:UPWK), which was worth $109.4 million at the end of the fourth quarter. On the second spot was Ancient Art (Teton Capital) which amassed $96.3 million worth of shares. Hawk Ridge Management, Candlestick Capital Management, and Arrowstreet Capital 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 IvyRock Asset Management allocated the biggest weight to Upwork Inc. (NASDAQ:UPWK), around 10.56% of its 13F portfolio. Ancient Art (Teton Capital) is also relatively very bullish on the stock, earmarking 9.35 percent of its 13F equity portfolio to UPWK.

Since Upwork Inc. (NASDAQ:UPWK) has faced falling interest from hedge fund managers, we can see that there exists a select few fund managers that slashed their positions entirely heading into Q2. At the top of the heap, Richard Driehaus’s Driehaus Capital said goodbye to the largest investment of all the hedgies tracked by Insider Monkey, worth an estimated $31.2 million in stock, and Sahm Adrangi’s Kerrisdale Capital was right behind this move, as the fund sold off about $5.3 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 2 funds heading into Q2.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Upwork Inc. (NASDAQ:UPWK) but similarly valued. These stocks are Just Eat Takeaway.com N.V. (NASDAQ:GRUB), Air Lease Corp (NYSE:AL), Omnicell, Inc. (NASDAQ:OMCL), South State Corporation (NASDAQ:SSB), Valley National Bancorp (NASDAQ:VLY), Q2 Holdings Inc (NYSE:QTWO), and Alliance Data Systems Corporation (NYSE:ADS). All of these stocks’ market caps are closest to UPWK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GRUB 35 1075678 -3
AL 27 917435 3
OMCL 19 73328 -1
SSB 24 252240 7
VLY 17 87726 0
QTWO 26 248123 3
ADS 36 1420743 4
Average 26.3 582182 1.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.3 hedge funds with bullish positions and the average amount invested in these stocks was $582 million. That figure was $531 million in UPWK’s case. Alliance Data Systems Corporation (NYSE:ADS) is the most popular stock in this table. On the other hand Valley National Bancorp (NASDAQ:VLY) is the least popular one with only 17 bullish hedge fund positions. Upwork Inc. (NASDAQ:UPWK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UPWK is 70.7. 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 22.8% in 2021 through July 2nd and still beat the market by 6 percentage points. Hedge funds were also right about betting on UPWK as the stock returned 30.6% since the end of Q1 (through 7/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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