Hedge Funds Are Snapping Up HubSpot Inc (HUBS)

In this article we will take a look at whether hedge funds think HubSpot Inc (NYSE:HUBS) 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.

HubSpot Inc (NYSE:HUBS) shareholders have witnessed an increase in hedge fund interest recently. HubSpot Inc (NYSE:HUBS) was in 54 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 52. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 46 hedge funds in our database with HUBS holdings at the end of March. Our calculations also showed that HUBS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Tim Woolley of Polar Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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 let’s take a look at the recent hedge fund action encompassing HubSpot Inc (NYSE:HUBS).

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

Heading into the third quarter of 2021, a total of 54 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in HUBS over the last 24 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

The largest stake in HubSpot Inc (NYSE:HUBS) was held by SCGE Management, which reported holding $820.5 million worth of stock at the end of June. It was followed by Whale Rock Capital Management with a $357.3 million position. Other investors bullish on the company included Citadel Investment Group, Polar Capital, and North Peak Capital. In terms of the portfolio weights assigned to each position North Peak Capital allocated the biggest weight to HubSpot Inc (NYSE:HUBS), around 25.46% of its 13F portfolio. Greenlea Lane Capital is also relatively very bullish on the stock, dishing out 10.15 percent of its 13F equity portfolio to HUBS.

As industrywide interest jumped, key money managers have been driving this bullishness. Whale Rock Capital Management, managed by Alex Sacerdote, established the most valuable position in HubSpot Inc (NYSE:HUBS). Whale Rock Capital Management had $357.3 million invested in the company at the end of the quarter. Michael Kahan and Jeremy Kahan’s North Peak Capital also made a $131.3 million investment in the stock during the quarter. The following funds were also among the new HUBS investors: Gabriel Plotkin’s Melvin Capital Management, Glen Kacher’s Light Street Capital, and Panayotis Takis Sparaggis’s Alkeon Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as HubSpot Inc (NYSE:HUBS) but similarly valued. We will take a look at Coca-Cola Europacific Partners PLC (NASDAQ:CCEP), Deutsche Bank Aktiengesellschaft (NYSE:DB), Laboratory Corp. of America Holdings (NYSE:LH), Hess Corporation (NYSE:HES), Tyson Foods, Inc. (NYSE:TSN), Fifth Third Bancorp (NASDAQ:FITB), and Alexandria Real Estate Equities Inc (NYSE:ARE). All of these stocks’ market caps are closest to HUBS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CCEP 31 1300875 6
DB 20 1860258 4
LH 53 2555270 -1
HES 31 615716 5
TSN 33 743751 5
FITB 41 360346 3
ARE 28 583759 1
Average 33.9 1145711 3.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.9 hedge funds with bullish positions and the average amount invested in these stocks was $1146 million. That figure was $2675 million in HUBS’s case. Laboratory Corp. of America Holdings (NYSE:LH) is the most popular stock in this table. On the other hand Deutsche Bank Aktiengesellschaft (NYSE:DB) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks HubSpot Inc (NYSE:HUBS) is more popular among hedge funds. Our overall hedge fund sentiment score for HUBS 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 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 returned 22.9% in 2021 through October 1st but still managed to beat the market by 5.6 percentage points. Hedge funds were also right about betting on HUBS as the stock returned 17.4% since the end of June (through 10/1) 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.