Was The Smart Money Right About Smartsheet Inc. (SMAR)?

In this article we are going to use hedge fund sentiment as a tool and determine whether Smartsheet Inc. (NYSE:SMAR) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Hedge fund interest in Smartsheet Inc. (NYSE:SMAR) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SMAR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). At the end of this article we will also compare SMAR to other stocks including Ozon Holdings PLC (NASDAQ:OZON), RenaissanceRe Holdings Ltd. (NYSE:RNR), and Lamar Advertising Company (NASDAQ:LAMR) to get a better sense of its popularity.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Colin Moran Abdiel Capital

Colin Moran of Abdiel Capital Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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. 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 homepage. Keeping this in mind let’s review the key hedge fund action regarding Smartsheet Inc. (NYSE:SMAR).

Do Hedge Funds Think SMAR Is A Good Stock To Buy Now?

At Q4’s end, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the third quarter of 2020. By comparison, 44 hedge funds held shares or bullish call options in SMAR a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SMAR A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, 12 West Capital Management, managed by Joel Ramin, holds the number one position in Smartsheet Inc. (NYSE:SMAR). 12 West Capital Management has a $245.1 million position in the stock, comprising 10.5% of its 13F portfolio. On 12 West Capital Management’s heels is Michael Pausic of Foxhaven Asset Management, with a $215.8 million position; 5.7% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions consist of Colin Moran’s Abdiel Capital Advisors, Alex Sacerdote’s Whale Rock Capital Management and Panayotis Takis Sparaggis’s Alkeon Capital Management. In terms of the portfolio weights assigned to each position Jeneq Management allocated the biggest weight to Smartsheet Inc. (NYSE:SMAR), around 10.91% of its 13F portfolio. Calixto Global Investors is also relatively very bullish on the stock, earmarking 10.83 percent of its 13F equity portfolio to SMAR.

Since Smartsheet Inc. (NYSE:SMAR) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedge funds that decided to sell off their entire stakes heading into Q1. It’s worth mentioning that Philippe Laffont’s Coatue Management dumped the largest stake of all the hedgies monitored by Insider Monkey, worth about $221.8 million in stock, and Daniel Sundheim’s D1 Capital Partners was right behind this move, as the fund cut about $170.2 million worth. These bearish behaviors are interesting, 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 – not necessarily in the same industry as Smartsheet Inc. (NYSE:SMAR) but similarly valued. These stocks are Ozon Holdings PLC (NASDAQ:OZON), RenaissanceRe Holdings Ltd. (NYSE:RNR), Lamar Advertising Company (NASDAQ:LAMR), Inphi Corporation (NYSE:IPHI), Carlisle Companies, Inc. (NYSE:CSL), Gentex Corporation (NASDAQ:GNTX), and Arch Coal Inc (NYSE:ACI). This group of stocks’ market caps are similar to SMAR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OZON 21 150922 21
RNR 39 669309 2
LAMR 36 528338 -1
IPHI 34 1272318 0
CSL 17 192963 -11
GNTX 36 665709 -4
ACI 19 2754401 -7
Average 28.9 890566 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.9 hedge funds with bullish positions and the average amount invested in these stocks was $891 million. That figure was $1723 million in SMAR’s case. RenaissanceRe Holdings Ltd. (NYSE:RNR) is the most popular stock in this table. On the other hand Carlisle Companies, Inc. (NYSE:CSL) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Smartsheet Inc. (NYSE:SMAR) is more popular among hedge funds. Our overall hedge fund sentiment score for SMAR is 82. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Unfortunately SMAR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SMAR were disappointed as the stock returned -14.4% since the end of the fourth quarter (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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