Were Hedge Funds Right About Coupa Software Incorporated (COUP)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Coupa Software Incorporated (NASDAQ:COUP) based on that data and determine whether they were really smart about the stock.

Is Coupa Software Incorporated (NASDAQ:COUP) an exceptional investment right now? The best stock pickers were turning less bullish. The number of long hedge fund positions shrunk by 2 in recent months. Coupa Software Incorporated (NASDAQ:COUP) was in 52 hedge funds’ portfolios at the end of September. The all time high for this statistic is 66. Our calculations also showed that COUP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 54 hedge funds in our database with COUP holdings at the end of June.

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. Now we’re going to take a glance at the key hedge fund action regarding Coupa Software Incorporated (NASDAQ:COUP).

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

Heading into the fourth quarter of 2021, a total of 52 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the previous quarter. On the other hand, there were a total of 50 hedge funds with a bullish position in COUP a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Coupa Software Incorporated (NASDAQ:COUP) was held by Lone Pine Capital, which reported holding $1000.8 million worth of stock at the end of September. It was followed by Viking Global with a $858.7 million position. Other investors bullish on the company included Alkeon Capital Management, Tiger Global Management LLC, and Select Equity Group. In terms of the portfolio weights assigned to each position Andar Capital allocated the biggest weight to Coupa Software Incorporated (NASDAQ:COUP), around 8.04% of its 13F portfolio. Tybourne Capital Management is also relatively very bullish on the stock, dishing out 5.54 percent of its 13F equity portfolio to COUP.

Due to the fact that Coupa Software Incorporated (NASDAQ:COUP) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of fund managers that slashed their entire stakes by the end of the third quarter. Interestingly, Spencer M. Waxman’s Shannon River Fund Management said goodbye to the largest stake of the 750 funds tracked by Insider Monkey, totaling an estimated $52.3 million in stock. Steve Zheng’s fund, Deepcurrents Investment Group, also cut its stock, about $31.4 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Coupa Software Incorporated (NASDAQ:COUP) but similarly valued. We will take a look at GoodRx Holdings, Inc. (NASDAQ:GDRX), 10x Genomics, Inc. (NASDAQ:TXG), MarketAxess Holdings Inc. (NASDAQ:MKTX), DLocal Limited (NASDAQ:DLO), Repligen Corporation (NASDAQ:RGEN), Olaplex Holdings Inc. (NASDAQ:OLPX), and WPP Plc (NASDAQ:WPP). This group of stocks’ market caps match COUP’s market cap.

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As you can see these stocks had an average of 27.7 hedge funds with bullish positions and the average amount invested in these stocks was $780 million. That figure was $4542 million in COUP’s case. Olaplex Holdings Inc. (NASDAQ:OLPX) is the most popular stock in this table. On the other hand WPP Plc (NASDAQ:WPP) is the least popular one with only 5 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 76.6. 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, COUP wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on COUP were disappointed as the stock returned -38.7% 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.

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