Hedge Funds Are Souring On Lightspeed Commerce Inc. (LSPD)

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Lightspeed Commerce Inc. (NYSE:LSPD)? The smart money sentiment can provide an answer to this question.

Lightspeed Commerce Inc. (NYSE:LSPD) was in 26 hedge funds’ portfolios at the end of September. The all time high for this statistic is 29. LSPD has experienced a decrease in hedge fund interest in recent months. There were 29 hedge funds in our database with LSPD positions at the end of the second quarter. Our calculations also showed that LSPD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind we’re going to go over the new hedge fund action regarding Lightspeed Commerce Inc. (NYSE:LSPD).

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

At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LSPD over the last 25 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Vista Equity Partners was the largest shareholder of Lightspeed Commerce Inc. (NYSE:LSPD), with a stake worth $133.8 million reported as of the end of September. Trailing Vista Equity Partners was Echo Street Capital Management, which amassed a stake valued at $127.6 million. Berylson Capital Partners, Tudor Investment Corp, and Millennium 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 Berylson Capital Partners allocated the biggest weight to Lightspeed Commerce Inc. (NYSE:LSPD), around 16.87% of its 13F portfolio. NewGen Asset Management is also relatively very bullish on the stock, dishing out 5.96 percent of its 13F equity portfolio to LSPD.

Because Lightspeed Commerce Inc. (NYSE:LSPD) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there were a few hedgies that elected to cut their entire stakes in the third quarter. It’s worth mentioning that Greg Poole’s Echo Street Capital Management sold off the biggest investment of the “upper crust” of funds followed by Insider Monkey, comprising close to $145.5 million in stock, and Robert Smith’s Vista Equity Partners was right behind this move, as the fund cut about $116 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 3 funds in the third quarter.

Let’s check out hedge fund activity in other stocks similar to Lightspeed Commerce Inc. (NYSE:LSPD). These stocks are Masco Corporation (NYSE:MAS), News Corp (NASDAQ:NWS), Lumen Technologies, Inc. (NYSE:LUMN), Eastman Chemical Company (NYSE:EMN), Elastic N.V. (NYSE:ESTC), Leidos Holdings Inc (NYSE:LDOS), and The Mosaic Company (NYSE:MOS). This group of stocks’ market values resemble LSPD’s market value.

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 $852 million. That figure was $632 million in LSPD’s case. Elastic N.V. (NYSE:ESTC) is the most popular stock in this table. On the other hand News Corp (NASDAQ:NWS) is the least popular one with only 13 bullish hedge fund positions. Lightspeed Commerce Inc. (NYSE:LSPD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LSPD is 43. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 31.1% in 2021 through December 9th and surpassed the market again by 5.1 percentage points. Unfortunately LSPD wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); LSPD investors were disappointed as the stock returned -52.5% since the end of September (through 12/9) 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 in 2021.

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