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Why Spotify Technology (SPOT) Stock is a Compelling Investment Case

Rowan Street Capital recently released its Q2 2020 Investor Letter, a copy of which you can download here. The Fund posted a return of 43.2% for the quarter (gross), outperforming its benchmark, the S&P 500 Index which returned 20.5% in the same quarter. You should check out Rowan Street Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash.

In the said letter, Rowan Street Capital highlighted a few stocks and Spotify Technology S.A. (NYSE:SPOT) is one of them. Spotify Technology S.A. (NYSE:SPOT) provides an audio streaming platform. Year-to-date, Spotify Technology S.A. (NYSE:SPOT) stock gained 87% and on July 17th it had a closing price of $263.23. Here is what Rowan Street Capital said:

“Spotify was the biggest contributor to our performance in 2020, and it has grown to be the biggest position in the fund (largely through capital gains). We first started buying shares back in May 2018 shortly after its IPO. We patiently waited for 2 years for Spotify stock to go up 90% in a matter of only two months, which compensated us handsomely for the wait.

Spotify opened for trading on the NYSE on April 3, 2018. Initial pre-trading reference price was US$132.00 per share and the opening price of the shares was US$165.90 per share, or approximately 25.7% higher than the NYSE reference price. As you can tell from the above graph, Spotify had lots of ups and downs over the past 2 years, but until the end of May 2020 the stock did absolutely nothing.

Psychologically, it’s not easy to go through a two-year stagnation period in a stock (see graph above) while watching the market and its peers go up and up. What kept us in this position was our deep conviction in the company and its management.”

In Q1 2020, the number of bullish hedge fund positions on Spotify Technology S.A. (NYSE:SPOT) stock increased by about 5% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with Spotify’s growth potential. Our calculations showed that Spotify Technology S.A. (NYSE:SPOT) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. You can subscribe to our free enewsletter below to receive our stories in your inbox:

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