At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Verra Mobility Corporation (NASDAQ:VRRM) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Verra Mobility Corporation (NASDAQ:VRRM) was in 25 hedge funds’ portfolios at the end of June. The all time high for this statistics is 33. VRRM shareholders have witnessed an increase in support from the world’s most elite money managers recently. There were 23 hedge funds in our database with VRRM holdings at the end of March. Our calculations also showed that VRRM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most market participants, hedge funds are viewed as unimportant, old investment tools of the past. While there are more than 8000 funds in operation at present, We look at the crème de la crème of this group, around 850 funds. Most estimates calculate that this group of people direct bulk of the smart money’s total asset base, and by paying attention to their inimitable picks, Insider Monkey has identified many investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Paul Tudor Jones of Tudor Investment Corp
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. With all of this in mind let’s go over the fresh hedge fund action regarding Verra Mobility Corporation (NASDAQ:VRRM).
How are hedge funds trading Verra Mobility Corporation (NASDAQ:VRRM)?
At the end of June, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in VRRM over the last 20 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Verra Mobility Corporation (NASDAQ:VRRM) was held by ValueAct Capital, which reported holding $60.7 million worth of stock at the end of September. It was followed by Tremblant Capital with a $58.4 million position. Other investors bullish on the company included Scopia Capital, Crescent Park Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position SCW Capital Management allocated the biggest weight to Verra Mobility Corporation (NASDAQ:VRRM), around 7.53% of its 13F portfolio. Crescent Park Management is also relatively very bullish on the stock, designating 3.65 percent of its 13F equity portfolio to VRRM.
As aggregate interest increased, specific money managers have been driving this bullishness. Tremblant Capital, managed by Brett Barakett, initiated the largest position in Verra Mobility Corporation (NASDAQ:VRRM). Tremblant Capital had $58.4 million invested in the company at the end of the quarter. Matt Sirovich and Jeremy Mindich’s Scopia Capital also made a $31.3 million investment in the stock during the quarter. The other funds with brand new VRRM positions are Zachary Miller’s Parian Global Management, Rob Citrone’s Discovery Capital Management, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Verra Mobility Corporation (NASDAQ:VRRM). We will take a look at Hilton Grand Vacations Inc. (NYSE:HGV), Hilltop Holdings Inc. (NYSE:HTH), 8×8, Inc. (NASDAQ:EGHT), Onto Innovation Inc. (NYSE:ONTO), Compass Minerals International, Inc. (NYSE:CMP), Osisko Gold Royalties Ltd (NYSE:OR), and Callaway Golf Company (NYSE:ELY). This group of stocks’ market values resemble VRRM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HGV | 30 | 554675 | 1 |
| HTH | 23 | 107835 | 8 |
| EGHT | 21 | 417819 | 1 |
| ONTO | 17 | 161796 | 6 |
| CMP | 18 | 62058 | 2 |
| OR | 15 | 143014 | 2 |
| ELY | 24 | 277158 | 1 |
| Average | 21.1 | 246336 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $246 million. That figure was $247 million in VRRM’s case. Hilton Grand Vacations Inc. (NYSE:HGV) is the most popular stock in this table. On the other hand Osisko Gold Royalties Ltd (NYSE:OR) is the least popular one with only 15 bullish hedge fund positions. Verra Mobility Corporation (NASDAQ:VRRM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VRRM is 63.1. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately VRRM wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on VRRM were disappointed as the stock returned -7.2% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Follow Verra Mobility Corp (NASDAQ:VRRM)
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Disclosure: None. This article was originally published at Insider Monkey.
