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. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was VEON Ltd. (NASDAQ:VEON).
VEON Ltd. (NASDAQ:VEON) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 11 hedge funds’ portfolios at the end of December. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Cyberark Software Ltd (NASDAQ:CYBR), Lancaster Colony Corporation (NASDAQ:LANC), and ACI Worldwide Inc (NASDAQ:ACIW) to gather more data points. Our calculations also showed that VEON 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).
In the eyes of most investors, hedge funds are seen as unimportant, old financial tools of yesteryear. While there are greater than 8000 funds with their doors open at the moment, We hone in on the bigwigs of this group, approximately 850 funds. These money managers administer most of the smart money’s total capital, and by watching their matchless equity investments, Insider Monkey has identified various investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Howard Marks of Oaktree Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. 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. Keeping this in mind let’s take a glance at the fresh hedge fund action regarding VEON Ltd. (NASDAQ:VEON).
What does smart money think about VEON Ltd. (NASDAQ:VEON)?
At the end of the fourth quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in VEON over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Millennium Management was the largest shareholder of VEON Ltd. (NASDAQ:VEON), with a stake worth $26.9 million reported as of the end of September. Trailing Millennium Management was Two Sigma Advisors, which amassed a stake valued at $10.2 million. Arrowstreet Capital, Renaissance Technologies, and Oaktree 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 DSAM Partners allocated the biggest weight to VEON Ltd. (NASDAQ:VEON), around 0.29% of its 13F portfolio. Oaktree Capital Management is also relatively very bullish on the stock, setting aside 0.08 percent of its 13F equity portfolio to VEON.
Since VEON Ltd. (NASDAQ:VEON) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there exists a select few money managers that elected to cut their entire stakes last quarter. Interestingly, Richard Driehaus’s Driehaus Capital said goodbye to the largest position of the 750 funds followed by Insider Monkey, valued at close to $14.2 million in stock. Donald Sussman’s fund, Paloma Partners, also dumped its stock, about $1.2 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to VEON Ltd. (NASDAQ:VEON). These stocks are Cyberark Software Ltd (NASDAQ:CYBR), Lancaster Colony Corporation (NASDAQ:LANC), ACI Worldwide Inc (NASDAQ:ACIW), and Enable Midstream Partners LP (NYSE:ENBL). All of these stocks’ market caps resemble VEON’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CYBR | 20 | 210449 | -1 |
| LANC | 16 | 203540 | -10 |
| ACIW | 20 | 330169 | -1 |
| ENBL | 4 | 38682 | -1 |
| Average | 15 | 195710 | -3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $196 million. That figure was $66 million in VEON’s case. Cyberark Software Ltd (NASDAQ:CYBR) is the most popular stock in this table. On the other hand Enable Midstream Partners LP (NYSE:ENBL) is the least popular one with only 4 bullish hedge fund positions. VEON Ltd. (NASDAQ:VEON) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately VEON wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); VEON investors were disappointed as the stock returned -33.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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.
