The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 752 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 September 30th. In this article we look at what those investors think of VSE Corporation (NASDAQ:VSEC).
VSE Corporation (NASDAQ:VSEC) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds’ portfolios at the end of September. 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 Rite Aid Corporation (NYSE:RAD), CONSOL Coal Resources LP (NYSE:CCR), and Park-Ohio Holdings Corp. (NASDAQ:PKOH) to gather more data points. Our calculations also showed that VSEC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to take a gander at the fresh hedge fund action encompassing VSE Corporation (NASDAQ:VSEC).
What does smart money think about VSE Corporation (NASDAQ:VSEC)?
At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 5 hedge funds held shares or bullish call options in VSEC a year ago. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the most valuable position in VSE Corporation (NASDAQ:VSEC). Citadel Investment Group has a $0.4 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake of Renaissance Technologies, with a $0.4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other professional money managers that hold long positions comprise David E. Shaw’s D E Shaw, Roger Ibbotson’s Zebra Capital Management and . In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to VSE Corporation (NASDAQ:VSEC), around 0.23% of its 13F portfolio. D E Shaw is also relatively very bullish on the stock, setting aside 0.0005 percent of its 13F equity portfolio to VSEC.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Zebra Capital Management).
Let’s go over hedge fund activity in other stocks similar to VSE Corporation (NASDAQ:VSEC). We will take a look at Rite Aid Corporation (NYSE:RAD), CONSOL Coal Resources LP (NYSE:CCR), Park-Ohio Holdings Corp. (NASDAQ:PKOH), and VirnetX Holding Corporation (NYSE:VHC). This group of stocks’ market values match VSEC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RAD | 8 | 8650 | -1 |
| CCR | 4 | 76134 | 0 |
| PKOH | 8 | 28571 | 1 |
| VHC | 4 | 470 | 1 |
| Average | 6 | 28456 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $1 million in VSEC’s case. Rite Aid Corporation (NYSE:RAD) is the most popular stock in this table. On the other hand CONSOL Coal Resources LP (NYSE:CCR) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks VSE Corporation (NASDAQ:VSEC) is even less popular than CCR. Hedge funds clearly dropped the ball on VSEC as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 VSEC as the stock returned 19.9% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
