Is HubSpot (HUBS) A Worthy Investment to Take?

Alger, an investment management firm, published its “Alger Mid Cap Focus Fund” second quarter 2021 investor letter – a copy of which can be downloaded here.  During the quarter, the largest portfolio sector weightings for the fund were Information Technology and Industrials. The largest sector overweight was Industrials. Class Z shares of the Alger Mid Cap Focus Fund underperformed the Russell Midcap Growth Index during the second quarter of 2021. You can take a look at the fund’s top 5 holdings to have an idea about their top bets for 2021.

In the Q2 2021 investor letter of Alger, the fund mentioned HubSpot, Inc. (NYSE: HUBS), and discussed its stance on the firm. HubSpot, Inc. is a Cambridge, Massachusetts-based software company, that currently has a $31.1 billion market capitalization. HUBS delivered a 67.02% return since the beginning of the year, while its 12-month returns are up by 154.26%. The stock closed at $659.05 per share on August 06, 2021.

Here is what Alger has to say about HubSpot, Inc. in its Q2 2021 investor letter:

HubSpot provides a cloud-based marketing and sales software platform that enables small and mid-size businesses (SMB) to attract new potential customers, convert them to paying customers and retain them. HubSpot targets its services to companies with 10 to 2,000 employees and seeks to attract
visitors to its clients’ digital content through inbound marketing techniques. It then seeks to convert visitors into leads, close leads into customers, and improve engagement and customer services. The stock outperformed during the second quarter after the company reported accelerating growth momentum at scale during the first three months of this year. The headwinds HubSpot experienced during the pandemic created a setup for the company to emerge from the crisis in a much stronger strategic position than before. Management raised fiscal year 2021 revenue guidance by $77 million, a 6.5% increase, after just one quarter into the fiscal year, implying accelerating growth into the rest of the year. We believe HubSpot currently has potential to revise upward annual revenue guidance throughout the year. In addition, the company has been expanding its services and has moved from simply helping small businesses grow better to providing what we believe is the best-of-breed customer relationship and customer experience platform for companies interested in building scale.”


Based on our calculations, HubSpot, Inc. (NYSE: HUBS) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. HUBS was in 46 hedge fund portfolios at the end of the first quarter of 2021, compared to 52 funds in the fourth quarter of 2020. HubSpot, Inc. (NYSE: HUBS) delivered a 36.13% return in the past 3 months.

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 S&P 500 ETFs by 115 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.

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