The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. 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 Coupa Software Incorporated (NASDAQ:COUP).
Is COUP a good stock to buy now? Coupa Software Incorporated (NASDAQ:COUP) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 50 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that COUP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as First Republic Bank (NYSE:FRC), Zscaler, Inc. (NASDAQ:ZS), and Suncor Energy Inc. (NYSE:SU) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 66 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 website. With all of this in mind we’re going to take a glance at the fresh hedge fund action regarding Coupa Software Incorporated (NASDAQ:COUP).
Hedge fund activity in Coupa Software Incorporated (NASDAQ:COUP)
At third quarter’s end, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 57 hedge funds held shares or bullish call options in COUP a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Lone Pine Capital, holds the number one position in Coupa Software Incorporated (NASDAQ:COUP). Lone Pine Capital has a $1.1873 billion position in the stock, comprising 5.1% of its 13F portfolio. The second most bullish fund manager is Alex Sacerdote of Whale Rock Capital Management, with a $418.6 million position; the fund has 2.8% of its 13F portfolio invested in the stock. Some other peers that are bullish include Panayotis Takis Sparaggis’s Alkeon Capital Management, Gil Simon’s SoMa Equity Partners and Daniel Patrick Gibson’s Sylebra Capital Management. In terms of the portfolio weights assigned to each position Center Lake Capital allocated the biggest weight to Coupa Software Incorporated (NASDAQ:COUP), around 18.28% of its 13F portfolio. Stony Point Capital is also relatively very bullish on the stock, setting aside 7.06 percent of its 13F equity portfolio to COUP.
Because Coupa Software Incorporated (NASDAQ:COUP) has faced falling interest from the smart money, it’s safe to say that there exists a select few funds who were dropping their positions entirely last quarter. Interestingly, David Goel and Paul Ferri’s Matrix Capital Management cut the largest stake of all the hedgies monitored by Insider Monkey, comprising an estimated $47.9 million in stock. Ben Levine, Andrew Manuel and Stefan Renold’s fund, LMR Partners, also dumped its stock, about $27.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to Coupa Software Incorporated (NASDAQ:COUP). These stocks are First Republic Bank (NYSE:FRC), Zscaler, Inc. (NASDAQ:ZS), Suncor Energy Inc. (NYSE:SU), PG&E Corporation (NYSE:PCG), Ameriprise Financial, Inc. (NYSE:AMP), Keysight Technologies Inc (NYSE:KEYS), and Laboratory Corp. of America Holdings (NYSE:LH). All of these stocks’ market caps resemble COUP’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.6 hedge funds with bullish positions and the average amount invested in these stocks was $1670 million. That figure was $3191 million in COUP’s case. PG&E Corporation (NYSE:PCG) is the most popular stock in this table. On the other hand Suncor Energy Inc. (NYSE:SU) is the least popular one with only 22 bullish hedge fund positions. Coupa Software Incorporated (NASDAQ:COUP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for COUP is 53.7. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on COUP as the stock returned 17.3% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.