Does Validus Holdings, Ltd. (VR) Represent a Good Investment?

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge funds have been producing disappointing net returns in recent years, however that was partly due to the poor performance of small-cap stocks in general. Well, small-cap stocks finally turned the corner and have been beating the large-cap stocks by more than 10 percentage points over the last five months.This means the relevancy of hedge funds’ public filings became inarguable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Validus Holdings, Ltd. (NYSE:VR) .

Is Validus Holdings, Ltd. (NYSE:VR) a buy, sell, or hold? The best stock pickers seem to be taking a bearish view, judging by the fact that the number of long hedge fund investments declined by two last quarter. In this way, 19 funds tracked by Insider Monkey held shares of Validus at the end of September. At the end of this article we will also compare VR to other stocks including Bright Horizons Family Solutions Inc (NYSE:BFAM), DCP Midstream Partners, LP (NYSE:DPM), and Pool Corporation (NASDAQ:POOL) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Now, let’s go over the latest action surrounding Validus Holdings, Ltd. (NYSE:VR).

How have hedgies been trading Validus Holdings, Ltd. (NYSE:VR)?

Heading into the fourth quarter of 2016, a total of 17 of the hedge funds tracked by Insider Monkey were long Validus Holdings, Ltd. (NYSE:VR), a change of down by 11% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in VR at the beginning of this year. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Polar Capital, led by Brian Ashford-Russell and Tim Woolley, holds the largest position in Validus Holdings, Ltd. (NYSE:VR). Polar Capital has a $74.1 million position in the stock, comprising 1.3% of its 13F portfolio. Coming in second is Cliff Asness’ AQR Capital Management, which holds a $65.8 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that hold long positions comprise Richard S. Pzena’s Pzena Investment Management, Jim Simons’ Renaissance Technologies and John D. Gillespie’s Prospector Partners. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that said goodbye to their entire stakes in the stock during the third quarter. At the top of the heap, Jacob Gottlieb’s Visium Asset Management said goodbye to the biggest stake of the 700 funds studied by Insider Monkey, comprising close to $6.2 million in stock. Michael Platt and William Reeves’s fund, BlueCrest Capital Mgmt., also dropped its stock, about $0.3 million worth.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Validus Holdings, Ltd. (NYSE:VR) but similarly valued. We will take a look at Bright Horizons Family Solutions Inc (NYSE:BFAM), DCP Midstream Partners, LP (NYSE:DPM), Pool Corporation (NASDAQ:POOL), and Cullen/Frost Bankers, Inc. (NYSE:CFR). All of these stocks’ market caps match VR’s market cap.

As you can see these stocks had an average of 15 funds with bullish positions and the average amount invested in these stocks was $95 million, which is lower than the $220 million figure in VR’s case. Pool Corporation (NASDAQ:POOL) is the most popular stock in this table. On the other hand DCP Midstream Partners, LP (NYSE:DPM) is the least popular one with only eight investors holding shares. Validus Holdings, Ltd. (NYSE:VR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Pool Corporation (NASDAQ:POOL) might be a better candidate to consider taking a long position in.