Were Hedge Funds Right About Smartsheet Inc. (SMAR) ?

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 first 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 4.5 years and analyze what the smart money thinks of Smartsheet Inc. (NYSE:SMAR) based on that data and determine whether they were really smart about the stock.

Is Smartsheet Inc. (NYSE:SMAR) a buy here? Investors who are in the know were reducing their bets on the stock. The number of bullish hedge fund positions shrunk by 3 lately. Our calculations also showed that SMAR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are a multitude of gauges stock traders employ to analyze publicly traded companies. A pair of the best gauges are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the best hedge fund managers can outperform the S&P 500 by a superb amount (see the details here).

Christian Leone of Luxor Capital Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. 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 gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to review the recent hedge fund action regarding Smartsheet Inc. (NYSE:SMAR).

How are hedge funds trading Smartsheet Inc. (NYSE:SMAR)?

At the end of the first quarter, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from one quarter earlier. On the other hand, there were a total of 30 hedge funds with a bullish position in SMAR a year ago. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

More specifically, Whale Rock Capital Management was the largest shareholder of Smartsheet Inc. (NYSE:SMAR), with a stake worth $232.9 million reported as of the end of September. Trailing Whale Rock Capital Management was Coatue Management, which amassed a stake valued at $230.2 million. 12 West Capital Management, Tiger Global Management LLC, and Alkeon Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position 12 West Capital Management allocated the biggest weight to Smartsheet Inc. (NYSE:SMAR), around 10.98% of its 13F portfolio. Cota Capital is also relatively very bullish on the stock, dishing out 10.21 percent of its 13F equity portfolio to SMAR.

Due to the fact that Smartsheet Inc. (NYSE:SMAR) has experienced a decline in interest from the smart money, it’s easy to see that there was a specific group of hedgies who sold off their positions entirely last quarter. It’s worth mentioning that Daryl Smith’s Kayak Investment Partners sold off the biggest stake of all the hedgies watched by Insider Monkey, valued at an estimated $14.9 million in stock. Peter Muller’s fund, PDT Partners, also dropped its stock, about $10.2 million worth. These transactions are interesting, as total hedge fund interest was cut by 3 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Smartsheet Inc. (NYSE:SMAR) but similarly valued. These stocks are Westlake Chemical Corporation (NYSE:WLK), Donaldson Company, Inc. (NYSE:DCI), Grupo Aval Acciones y Valores S.A. (NYSE:AVAL), and SolarWinds Corporation (NYSE:SWI). All of these 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
WLK 20 111151 -2
DCI 20 125557 -1
AVAL 5 10012 -2
SWI 14 2141429 -1
Average 14.75 597037 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $597 million. That figure was $1679 million in SMAR’s case. Westlake Chemical Corporation (NYSE:WLK) is the most popular stock in this table. On the other hand Grupo Aval Acciones y Valores S.A. (NYSE:AVAL) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Smartsheet Inc. (NYSE:SMAR) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on SMAR, though not to the same extent, as the stock returned 22.7% in Q2 and outperformed the market as well.

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