Were Hedge Funds Right About Spotify Technology S.A. (SPOT)?

Mabel R. Acton

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 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 March 31st, a week after the […]

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 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 March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtSpotify Technology S.A. (NYSE:SPOT) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Spotify Technology S.A. (NYSE:SPOT) was in 40 hedge funds’ portfolios at the end of March. SPOT investors should be aware of an increase in support from the world’s most elite money managers recently. There were 38 hedge funds in our database with SPOT holdings at the end of the previous quarter. Our calculations also showed that SPOT 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.

In today’s marketplace there are plenty of metrics investors put to use to evaluate publicly traded companies. Two of the most under-the-radar metrics are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the top fund managers can trounce the S&P 500 by a healthy amount (see the details here).

Chase Coleman of Tiger Global

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. Now we’re going to view the recent hedge fund action regarding Spotify Technology S.A. (NYSE:SPOT).

What does smart money think about Spotify Technology S.A. (NYSE:SPOT)?

At Q1’s end, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the fourth quarter of 2019. On the other hand, there were a total of 53 hedge funds with a bullish position in SPOT a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Tiger Global Management LLC held the most valuable stake in Spotify Technology S.A. (NYSE:SPOT), which was worth $332.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $161.6 million worth of shares. Eminence Capital, VGI Partners, and Tremblant Capital 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 VGI Partners allocated the biggest weight to Spotify Technology S.A. (NYSE:SPOT), around 10.51% of its 13F portfolio. Greenlea Lane Capital is also relatively very bullish on the stock, dishing out 6.36 percent of its 13F equity portfolio to SPOT.

As aggregate interest increased, specific money managers were breaking ground themselves. Holocene Advisors, managed by Brandon Haley, assembled the most valuable position in Spotify Technology S.A. (NYSE:SPOT). Holocene Advisors had $30.8 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also initiated a $11.9 million position during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, David Fiszel’s Honeycomb Asset Management, and Peter Muller’s PDT Partners.

Let’s go over hedge fund activity in other stocks similar to Spotify Technology S.A. (NYSE:SPOT). These stocks are Agilent Technologies Inc. (NYSE:A), Willis Towers Watson Public Limited Company (NASDAQ:WLTW), McKesson Corporation (NYSE:MCK), and Sirius XM Holdings Inc (NASDAQ:SIRI). This group of stocks’ market values match SPOT’s market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position A,35,2667892,-11 WLTW,43,1654147,8 MCK,63,2073564,12 SIRI,36,1134756,5 Average,44.25,1882590,3.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.25 hedge funds with bullish positions and the average amount invested in these stocks was $1883 million. That figure was $1125 million in SPOT’s case. McKesson Corporation (NYSE:MCK) is the most popular stock in this table. On the other hand Agilent Technologies Inc. (NYSE:A) is the least popular one with only 35 bullish hedge fund positions. Spotify Technology S.A. (NYSE:SPOT) is not the least popular stock in this group but hedge fund interest is still below average. 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 and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on SPOT as the stock returned 112.6% during the second quarter and outperformed the market by an even larger margin.

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

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