We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards HubSpot Inc (NYSE:HUBS) and determine whether hedge funds skillfully traded this stock.
Is HubSpot Inc (NYSE:HUBS) a superb investment right now? The best stock pickers were in a pessimistic mood. The number of long hedge fund positions went down by 6 recently. HubSpot Inc (NYSE:HUBS) was in 48 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 54. Our calculations also showed that HUBS 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. Keeping this in mind we’re going to take a gander at the fresh hedge fund action surrounding HubSpot Inc (NYSE:HUBS).
Tim Woolley of Polar Capital
Do Hedge Funds Think HUBS Is A Good Stock To Buy Now?
At Q3’s end, a total of 48 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. By comparison, 40 hedge funds held shares or bullish call options in HUBS a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, SCGE Management held the most valuable stake in HubSpot Inc (NYSE:HUBS), which was worth $951.9 million at the end of the third quarter. On the second spot was Whale Rock Capital Management which amassed $549.2 million worth of shares. Polar Capital, SQN Investors, and Hitchwood Capital 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 North Peak Capital allocated the biggest weight to HubSpot Inc (NYSE:HUBS), around 14.12% of its 13F portfolio. SCGE Management is also relatively very bullish on the stock, dishing out 8.83 percent of its 13F equity portfolio to HUBS.
Seeing as HubSpot Inc (NYSE:HUBS) has experienced falling interest from the entirety of the hedge funds we track, it’s safe to say that there were a few fund managers that elected to cut their full holdings heading into Q4. At the top of the heap, D. E. Shaw’s D E Shaw dropped the biggest investment of the 750 funds tracked by Insider Monkey, worth about $87.9 million in stock. Gabriel Plotkin’s fund, Melvin Capital Management, also sold off its stock, about $58.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 6 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as HubSpot Inc (NYSE:HUBS) but similarly valued. These stocks are HP Inc. (NYSE:HPQ), The Williams Companies, Inc. (NYSE:WMB), West Pharmaceutical Services Inc. (NYSE:WST), Liberty Broadband Corp (NASDAQ:LBRDK), LyondellBasell Industries NV (NYSE:LYB), Brown-Forman Corporation (NYSE:BF), and MongoDB, Inc. (NASDAQ:MDB). This group of 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 |
|---|---|---|---|
| HPQ | 34 | 1043926 | -5 |
| WMB | 40 | 658659 | 1 |
| WST | 29 | 794549 | -2 |
| LBRDK | 63 | 7101088 | 0 |
| LYB | 39 | 676597 | -2 |
| BF | 31 | 1656640 | 0 |
| MDB | 47 | 2171957 | 3 |
| Average | 40.4 | 2014774 | -0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.4 hedge funds with bullish positions and the average amount invested in these stocks was $2015 million. That figure was $2865 million in HUBS’s case. Liberty Broadband Corp (NASDAQ:LBRDK) is the most popular stock in this table. On the other hand West Pharmaceutical Services Inc. (NYSE:WST) is the least popular one with only 29 bullish hedge fund positions. HubSpot Inc (NYSE:HUBS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HUBS is 53.6. 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 positive signal but 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, HUBS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on HUBS were disappointed as the stock returned -27.7% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
