We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Virtu Financial Inc (NASDAQ:VIRT).
Virtu Financial Inc (NASDAQ:VIRT) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds’ portfolios at the end of the second quarter of 2021. Our calculations also showed that VIRT isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare VIRT to other stocks including nVent Electric plc (NYSE:NVT), JOYY Inc. (NASDAQ:YY), and Hexcel Corporation (NYSE:HXL) to get a better sense of its popularity.
In today’s marketplace there are plenty of metrics stock traders employ to appraise stocks. Some of the most innovative metrics are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the elite investment managers can beat the market by a solid amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a peek at the latest hedge fund action regarding Virtu Financial Inc (NASDAQ:VIRT).
Do Hedge Funds Think VIRT Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 28 hedge funds with a bullish position in VIRT a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the biggest position in Virtu Financial Inc (NASDAQ:VIRT). Renaissance Technologies has a $163.8 million position in the stock, comprising 0.2% of its 13F portfolio. On Renaissance Technologies’s heels is AQR Capital Management, managed by Cliff Asness, which holds a $44.4 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish consist of Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Parsa Kiai’s Steamboat Capital Partners and Lawrence Kam’s Sonic Capital. In terms of the portfolio weights assigned to each position Sonic Capital allocated the biggest weight to Virtu Financial Inc (NASDAQ:VIRT), around 2.52% of its 13F portfolio. Steamboat Capital Partners is also relatively very bullish on the stock, setting aside 2.13 percent of its 13F equity portfolio to VIRT.
Since Virtu Financial Inc (NASDAQ:VIRT) has witnessed bearish sentiment from hedge fund managers, it’s safe to say that there is a sect of hedge funds who sold off their entire stakes by the end of the second quarter. It’s worth mentioning that Jacob Doft’s Highline Capital Management cut the biggest investment of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $9.6 million in stock. Mark Coe’s fund, Intrinsic Edge Capital, also sold off its stock, about $8.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to Virtu Financial Inc (NASDAQ:VIRT). We will take a look at nVent Electric plc (NYSE:NVT), JOYY Inc. (NASDAQ:YY), Hexcel Corporation (NYSE:HXL), Progyny, Inc. (NASDAQ:PGNY), Rapid7 Inc (NASDAQ:RPD), Leslie’s, Inc. (NASDAQ:LESL), and Everbridge, Inc. (NASDAQ:EVBG). This group of stocks’ market caps are similar to VIRT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NVT | 30 | 401330 | -1 |
| YY | 24 | 340371 | 4 |
| HXL | 22 | 165435 | 4 |
| PGNY | 39 | 290008 | 13 |
| RPD | 17 | 136746 | -8 |
| LESL | 35 | 427806 | 8 |
| EVBG | 26 | 1200051 | -23 |
| Average | 27.6 | 423107 | -0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.6 hedge funds with bullish positions and the average amount invested in these stocks was $423 million. That figure was $269 million in VIRT’s case. Progyny, Inc. (NASDAQ:PGNY) is the most popular stock in this table. On the other hand Rapid7 Inc (NASDAQ:RPD) is the least popular one with only 17 bullish hedge fund positions. Virtu Financial Inc (NASDAQ:VIRT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VIRT is 39.9. 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. 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 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 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately VIRT wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); VIRT investors were disappointed as the stock returned -3.3% since the end of June (through 10/22) 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 in 2021.
Follow Virtu Financial Inc. (NASDAQ:VIRT)
Follow Virtu Financial Inc. (NASDAQ:VIRT)
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Disclosure: None. This article was originally published at Insider Monkey.
