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Were Hedge Funds Right About Piling Into HubSpot Inc (HUBS)?

We can judge whether HubSpot Inc (NYSE:HUBS) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.

Is HubSpot Inc (NYSE:HUBS) undervalued? Money managers are taking an optimistic view. The number of bullish hedge fund bets inched up by 1 lately. Our calculations also showed that HUBS isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

BlueMountain Capital Management's Returns, AUM and Holdings

Let’s go over the new hedge fund action surrounding HubSpot Inc (NYSE:HUBS).

How have hedgies been trading HubSpot Inc (NYSE:HUBS)?

At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in HUBS a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

HUBS_apr2019

More specifically, SCGE Management was the largest shareholder of HubSpot Inc (NYSE:HUBS), with a stake worth $98.4 million reported as of the end of September. Trailing SCGE Management was Alkeon Capital Management, which amassed a stake valued at $46.4 million. Two Sigma Advisors, Polar Capital, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.

As industrywide interest jumped, specific money managers were leading the bulls’ herd. North Peak Capital, managed by Michael Kahan and Jeremy Kahan, initiated the most valuable position in HubSpot Inc (NYSE:HUBS). North Peak Capital had $15.4 million invested in the company at the end of the quarter. Ken Fisher’s Fisher Asset Management also initiated a $6.7 million position during the quarter. The following funds were also among the new HUBS investors: Dmitry Balyasny’s Balyasny Asset Management, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s also examine hedge fund activity in other stocks similar to HubSpot Inc (NYSE:HUBS). These stocks are Monolithic Power Systems, Inc. (NASDAQ:MPWR), Coty Inc (NYSE:COTY), Momo Inc (NASDAQ:MOMO), and JetBlue Airways Corporation (NASDAQ:JBLU). This group of stocks’ market caps resemble HUBS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MPWR 25 170884 7
COTY 19 132043 -5
MOMO 21 521092 -24
JBLU 31 623972 1
Average 24 361998 -5.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $362 million. That figure was $349 million in HUBS’s case. JetBlue Airways Corporation (NASDAQ:JBLU) is the most popular stock in this table. On the other hand Coty Inc (NYSE:COTY) is the least popular one with only 19 bullish hedge fund positions. HubSpot Inc (NYSE:HUBS) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on HUBS as the stock returned 29.7% and outperformed the market by an even larger margin.

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

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