Is Virtusa Corporation (NASDAQ:VRTU) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Virtusa Corporation (NASDAQ:VRTU) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 13 hedge funds’ portfolios at the end of the third quarter of 2019. At the end of this article we will also compare VRTU to other stocks including Benchmark Electronics, Inc. (NYSE:BHE), SM Energy Company (NYSE:SM), and Middlesex Water Company (NASDAQ:MSEX) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most market participants, hedge funds are assumed to be worthless, outdated financial tools of the past. While there are over 8000 funds in operation at present, Our researchers hone in on the aristocrats of this group, about 750 funds. These hedge fund managers have their hands on most of the smart money’s total asset base, and by monitoring their finest stock picks, Insider Monkey has deciphered several investment strategies that have historically surpassed the broader indices. 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 May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a glance at the recent hedge fund action regarding Virtusa Corporation (NASDAQ:VRTU).
How have hedgies been trading Virtusa Corporation (NASDAQ:VRTU)?
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in VRTU a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Hawk Ridge Management was the largest shareholder of Virtusa Corporation (NASDAQ:VRTU), with a stake worth $17.7 million reported as of the end of September. Trailing Hawk Ridge Management was Renaissance Technologies, which amassed a stake valued at $11.9 million. P.A.W. Capital Partners, Millennium Management, and Portolan 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 P.A.W. Capital Partners allocated the biggest weight to Virtusa Corporation (NASDAQ:VRTU), around 4.94% of its 13F portfolio. Hawk Ridge Management is also relatively very bullish on the stock, designating 3.55 percent of its 13F equity portfolio to VRTU.
Since Virtusa Corporation (NASDAQ:VRTU) has faced declining sentiment from hedge fund managers, it’s safe to say that there were a few hedge funds that elected to cut their full holdings last quarter. Interestingly, Anand Parekh’s Alyeska Investment Group cut the largest position of all the hedgies tracked by Insider Monkey, totaling an estimated $7.4 million in stock. Richard Driehaus’s fund, Driehaus Capital, also said goodbye to its stock, about $5.1 million worth. These transactions 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 Virtusa Corporation (NASDAQ:VRTU). We will take a look at Benchmark Electronics, Inc. (NYSE:BHE), SM Energy Company (NYSE:SM), Middlesex Water Company (NASDAQ:MSEX), and Standard Motor Products, Inc. (NYSE:SMP). This group of stocks’ market values resemble VRTU’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BHE | 13 | 45160 | 1 |
| SM | 20 | 103726 | 2 |
| MSEX | 10 | 54131 | 1 |
| SMP | 13 | 111656 | 2 |
| Average | 14 | 78668 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $42 million in VRTU’s case. SM Energy Company (NYSE:SM) is the most popular stock in this table. On the other hand Middlesex Water Company (NASDAQ:MSEX) is the least popular one with only 10 bullish hedge fund positions. Virtusa Corporation (NASDAQ:VRTU) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on VRTU as the stock returned 24.1% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
