Hedge Funds Have Never Been This Bullish On Upwork Inc. (UPWK)

The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of June 28. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Upwork Inc. (NASDAQ:UPWK).

Upwork Inc. (NASDAQ:UPWK) investors should be aware of an increase in hedge fund interest of late. UPWK was in 10 hedge funds’ portfolios at the end of the second quarter of 2019. There were 9 hedge funds in our database with UPWK positions at the end of the previous quarter. Our calculations also showed that UPWK isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 market by 40 percentage points since May 2014 through May 30, 2019 (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.

David Atterbury - Whetstone Capital

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a glance at the new hedge fund action encompassing Upwork Inc. (NASDAQ:UPWK).

What does smart money think about Upwork Inc. (NASDAQ:UPWK)?

At the end of the second quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the first quarter of 2019. By comparison, 0 hedge funds held shares or bullish call options in UPWK a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

No of Hedge Funds with UPWK Positions

The largest stake in Upwork Inc. (NASDAQ:UPWK) was held by Ancient Art (Teton Capital), which reported holding $31.1 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $7.7 million position. Other investors bullish on the company included Berylson Capital Partners, Weld Capital Management, and Whetstone Capital Advisors.

With a general bullishness amongst the heavyweights, specific money managers have jumped into Upwork Inc. (NASDAQ:UPWK) headfirst. Whetstone Capital Advisors, managed by David Atterbury, established the most outsized position in Upwork Inc. (NASDAQ:UPWK). Whetstone Capital Advisors had $1.7 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $1.7 million position during the quarter. The following funds were also among the new UPWK investors: Anand Parekh’s Alyeska Investment Group, Paul Tudor Jones’s Tudor Investment Corp, and Claes Fornell’s CSat Investment Advisory.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Upwork Inc. (NASDAQ:UPWK) but similarly valued. These stocks are Newmark Group, Inc. (NASDAQ:NMRK), Sogou Inc. (NYSE:SOGO), Central Garden & Pet Company (NASDAQ:CENT), and Asbury Automotive Group, Inc. (NYSE:ABG). This group of stocks’ market values resemble UPWK’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NMRK 16 102144 -8
SOGO 5 1243 -3
CENT 19 136104 3
ABG 17 224636 2
Average 14.25 116032 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $116 million. That figure was $50 million in UPWK’s case. Central Garden & Pet Company (NASDAQ:CENT) is the most popular stock in this table. On the other hand Sogou Inc. (NYSE:SOGO) is the least popular one with only 5 bullish hedge fund positions. Upwork Inc. (NASDAQ:UPWK) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately UPWK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); UPWK investors were disappointed as the stock returned -17.2% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.

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