Hedge Funds Are Crazy About Smartsheet Inc. (SMAR)

·5 min read

In this article we will analyze whether Smartsheet Inc. (NYSE:SMAR) 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 by double digits annually.

Smartsheet Inc. (NYSE:SMAR) shareholders have witnessed an increase in activity from the world's largest hedge funds recently. Smartsheet Inc. (NYSE:SMAR) was in 50 hedge funds' portfolios at the end of September. The all time high for this statistic is 50. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 49 hedge funds in our database with SMAR positions at the end of the second quarter. Our calculations also showed that SMAR isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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 look at the recent hedge fund action surrounding Smartsheet Inc. (NYSE:SMAR).

Julian Robertson
Julian Robertson

Julian Robertson of Tiger Management

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

At Q3's end, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SMAR over the last 25 quarters. 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 Smartsheet Inc. (NYSE:SMAR) was held by Alkeon Capital Management, which reported holding $226.7 million worth of stock at the end of September. It was followed by Foxhaven Asset Management with a $118.4 million position. Other investors bullish on the company included Citadel Investment Group, Polar Capital, and 12 West Capital Management. In terms of the portfolio weights assigned to each position Calixto Global Investors allocated the biggest weight to Smartsheet Inc. (NYSE:SMAR), around 15.35% of its 13F portfolio. Kayak Investment Partners is also relatively very bullish on the stock, earmarking 7.3 percent of its 13F equity portfolio to SMAR.

As industrywide interest jumped, some big names were breaking ground themselves. Cavalry Asset Management, managed by John Hurley, created the biggest position in Smartsheet Inc. (NYSE:SMAR). Cavalry Asset Management had $29.4 million invested in the company at the end of the quarter. David Thomas's Atalan Capital also made a $20.6 million investment in the stock during the quarter. The following funds were also among the new SMAR investors: David Fiszel's Honeycomb Asset Management, Julian Robertson's Tiger Management, and Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital).

Let's now take a look at hedge fund activity in other stocks similar to Smartsheet Inc. (NYSE:SMAR). These stocks are Sensata Technologies Holding plc (NYSE:ST), Alleghany Corporation (NYSE:Y), Western Midstream Partners, LP (NYSE:WES), Cameco Corporation (NYSE:CCJ), Vornado Realty Trust (NYSE:VNO), Flex Ltd. (NASDAQ:FLEX), and Ovintiv Inc. (NYSE:OVV). This group of stocks' market caps are similar to SMAR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ST,29,1546287,-3 Y,30,325413,-2 WES,10,141259,1 CCJ,35,755744,10 VNO,25,194723,-4 FLEX,35,1149382,-8 OVV,44,684078,4 Average,29.7,685269,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.7 hedge funds with bullish positions and the average amount invested in these stocks was $685 million. That figure was $1378 million in SMAR's case. Ovintiv Inc. (NYSE:OVV) is the most popular stock in this table. On the other hand Western Midstream Partners, LP (NYSE:WES) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Smartsheet Inc. (NYSE:SMAR) is more popular among hedge funds. Our overall hedge fund sentiment score for SMAR is 86. 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. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately SMAR wasn't nearly as popular as these 5 stocks and hedge funds that were betting on SMAR were disappointed as the stock returned -7% since the end of the third quarter (through 11/30) 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 most 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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