Hedge Funds Are Coming Back To VMware, Inc. (VMW)

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about VMware, Inc. (NYSE:VMW).

VMware, Inc. (NYSE:VMW) investors should be aware of an increase in hedge fund interest in recent months. VMware, Inc. (NYSE:VMW) was in 31 hedge funds’ portfolios at the end of September. The all time high for this statistic is 43. There were 28 hedge funds in our database with VMW positions at the end of the second quarter. Our calculations also showed that VMW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind we’re going to review the new hedge fund action regarding VMware, Inc. (NYSE:VMW).

David Siegel of Two Sigma Advisors

Do Hedge Funds Think VMW Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the second quarter of 2021. On the other hand, there were a total of 31 hedge funds with a bullish position in VMW a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Ken Griffin’s Citadel Investment Group has the most valuable call position in VMware, Inc. (NYSE:VMW), worth close to $303.3 million, comprising 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Two Sigma Advisors, managed by John Overdeck and David Siegel, which holds a $196.4 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish include Ken Griffin’s Citadel Investment Group, Paul Marshall and Ian Wace’s Marshall Wace LLP and Himanshu Gulati’s Antara Capital. In terms of the portfolio weights assigned to each position Ursa Fund Management allocated the biggest weight to VMware, Inc. (NYSE:VMW), around 4.93% of its 13F portfolio. Antara Capital is also relatively very bullish on the stock, earmarking 2.28 percent of its 13F equity portfolio to VMW.

Now, specific money managers have jumped into VMware, Inc. (NYSE:VMW) headfirst. Islet Management, managed by Joseph Samuels, created the most valuable position in VMware, Inc. (NYSE:VMW). Islet Management had $22.3 million invested in the company at the end of the quarter. Joshua Friedman and Mitchell Julis’s Canyon Capital Advisors also made a $22.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Andrew Hahn’s Ursa Fund Management, Andrew Weiss’s Weiss Asset Management, and Stephen Mildenhall’s Contrarius Investment Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as VMware, Inc. (NYSE:VMW) but similarly valued. We will take a look at Workday Inc (NASDAQ:WDAY), Boston Scientific Corporation (NYSE:BSX), Activision Blizzard, Inc. (NASDAQ:ATVI), Stellantis N.V. (NYSE:STLA), Ecolab Inc. (NYSE:ECL), Eaton Corporation plc (NYSE:ETN), and Norfolk Southern Corp. (NYSE:NSC). All of these stocks’ market caps are closest to VMW’s market cap.

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As you can see these stocks had an average of 50.4 hedge funds with bullish positions and the average amount invested in these stocks was $2799 million. That figure was $619 million in VMW’s case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand Stellantis N.V. (NYSE:STLA) is the least popular one with only 24 bullish hedge fund positions. VMware, Inc. (NYSE:VMW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VMW is 35.9. 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 28.6% in 2021 through November 30th and surpassed the market again by 5.6 percentage points. Unfortunately VMW wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); VMW investors were disappointed as the stock returned -4.3% since the end of September (through 11/30) 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.

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Disclosure: None. This article was originally published at Insider Monkey.