Were Hedge Funds Right About Upwork Inc. (UPWK)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Upwork Inc. (NASDAQ:UPWK).

Is Upwork Inc. (NASDAQ:UPWK) going to take off soon? The smart money is in an optimistic mood. The number of bullish hedge fund positions rose by 3 in recent months. Our calculations also showed that UPWK isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). UPWK was in 24 hedge funds’ portfolios at the end of December. There were 21 hedge funds in our database with UPWK positions at the end of the previous quarter.

In the 21st century investor’s toolkit there are a lot of indicators stock traders can use to size up their stock investments. Two of the most innovative indicators are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the top fund managers can outperform the market by a significant amount (see the details here).

Sahm Adrangi Kerrisdale Capital

Sahm Adrangi of Kerrisdale Capital

We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to analyze the latest hedge fund action encompassing Upwork Inc. (NASDAQ:UPWK).

What does smart money think about Upwork Inc. (NASDAQ:UPWK)?

At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in UPWK over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Stockbridge Partners, managed by Sharlyn C. Heslam, holds the largest position in Upwork Inc. (NASDAQ:UPWK). Stockbridge Partners has a $56.9 million position in the stock, comprising 2.1% of its 13F portfolio. The second most bullish fund manager is Matt Sirovich and Jeremy Mindich of Scopia Capital, with a $40.5 million position; the fund has 3.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions encompass Quincy Lee’s Ancient Art (Teton Capital), Chuck Royce’s Royce & Associates and Sahm Adrangi’s Kerrisdale Capital. In terms of the portfolio weights assigned to each position Ancient Art (Teton Capital) allocated the biggest weight to Upwork Inc. (NASDAQ:UPWK), around 5.66% of its 13F portfolio. Cowbird Capital is also relatively very bullish on the stock, earmarking 5.49 percent of its 13F equity portfolio to UPWK.

As aggregate interest increased, some big names were leading the bulls’ herd. Stockbridge Partners, managed by Sharlyn C. Heslam, established the largest position in Upwork Inc. (NASDAQ:UPWK). Stockbridge Partners had $56.9 million invested in the company at the end of the quarter. Scott Coulter’s Cowbird Capital also initiated a $8.7 million position during the quarter. The other funds with new positions in the stock are Francis Cueto’s Asturias Capital, Anand Parekh’s Alyeska Investment Group, and Peter Muller’s PDT Partners.

Let’s now review hedge fund activity in other stocks similar to Upwork Inc. (NASDAQ:UPWK). We will take a look at Qiwi PLC (NASDAQ:QIWI), Green Dot Corporation (NYSE:GDOT), Encore Wire Corporation (NASDAQ:WIRE), and Matthews International Corp (NASDAQ:MATW). This group of stocks’ market caps match UPWK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
QIWI 10 75720 -5
GDOT 23 172718 0
WIRE 13 48294 -4
MATW 9 43937 -1
Average 13.75 85167 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $189 million in UPWK’s case. Green Dot Corporation (NYSE:GDOT) is the most popular stock in this table. On the other hand Matthews International Corp (NASDAQ:MATW) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Upwork Inc. (NASDAQ:UPWK) 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 1.0% in 2020 through May 1st and still beat the market by 12.9 percentage points. Unfortunately UPWK wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on UPWK were disappointed as the stock returned -20.1% during the four months of 2020 (through May 1st) 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 in 2020.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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