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Hedge Funds Nibbling On Spotify Technology S.A. (SPOT)

In this article you are going to find out whether hedge funds think Spotify Technology S.A. (NYSE:SPOT) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Spotify Technology S.A. (NYSE:SPOT) investors should pay attention to an increase in hedge fund sentiment of late. Our calculations also showed that SPOT 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 51 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chase Coleman of Tiger Global

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s go over the new hedge fund action surrounding Spotify Technology S.A. (NYSE:SPOT).

Hedge fund activity in Spotify Technology S.A. (NYSE:SPOT)

At the end of the first quarter, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. By comparison, 53 hedge funds held shares or bullish call options in SPOT a year ago. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

More specifically, Tiger Global Management LLC was the largest shareholder of Spotify Technology S.A. (NYSE:SPOT), with a stake worth $332.6 million reported as of the end of September. Trailing Tiger Global Management LLC was Renaissance Technologies, which amassed a stake valued at $161.6 million. Eminence Capital, VGI Partners, and Tremblant 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 VGI Partners allocated the biggest weight to Spotify Technology S.A. (NYSE:SPOT), around 10.51% of its 13F portfolio. Greenlea Lane Capital is also relatively very bullish on the stock, setting aside 6.36 percent of its 13F equity portfolio to SPOT.

As aggregate interest increased, key money managers were breaking ground themselves. Holocene Advisors, managed by Brandon Haley, established the most valuable position in Spotify Technology S.A. (NYSE:SPOT). Holocene Advisors had $30.8 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also initiated a $11.9 million position during the quarter. The following funds were also among the new SPOT investors: Dmitry Balyasny’s Balyasny Asset Management, David Fiszel’s Honeycomb Asset Management, and Peter Muller’s PDT Partners.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Spotify Technology S.A. (NYSE:SPOT) but similarly valued. We will take a look at Agilent Technologies Inc. (NYSE:A), Willis Towers Watson Public Limited Company (NASDAQ:WLTW), McKesson Corporation (NYSE:MCK), and Sirius XM Holdings Inc (NASDAQ:SIRI). This group of stocks’ market caps match SPOT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
A 35 2667892 -11
WLTW 43 1654147 8
MCK 63 2073564 12
SIRI 36 1134756 5
Average 44.25 1882590 3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.25 hedge funds with bullish positions and the average amount invested in these stocks was $1883 million. That figure was $1125 million in SPOT’s case. McKesson Corporation (NYSE:MCK) is the most popular stock in this table. On the other hand Agilent Technologies Inc. (NYSE:A) is the least popular one with only 35 bullish hedge fund positions. Spotify Technology S.A. (NYSE:SPOT) is not the least popular stock in this group but hedge fund interest is still below 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on SPOT as the stock returned 49% during the second quarter and outperformed the market by an even larger margin.

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