We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Vector Group Ltd (NYSE:VGR) based on those filings.
Is Vector Group Ltd (NYSE:VGR) ready to rally soon? Money managers are in a pessimistic mood. The number of bullish hedge fund bets shrunk by 2 recently. Our calculations also showed that VGR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Dmitry Balyasny of Balyasny Asset Management
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a peek at the fresh hedge fund action regarding Vector Group Ltd (NYSE:VGR).
What does smart money think about Vector Group Ltd (NYSE:VGR)?
At Q4’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in VGR over the last 18 quarters. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies, holds the number one position in Vector Group Ltd (NYSE:VGR). Renaissance Technologies has a $135.1 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is GLG Partners, managed by Noam Gottesman, which holds a $19.8 million position; 0.1% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism comprise Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and William B. Gray’s Orbis Investment Management. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Vector Group Ltd (NYSE:VGR), around 0.1% of its 13F portfolio. GLG Partners is also relatively very bullish on the stock, dishing out 0.07 percent of its 13F equity portfolio to VGR.
Because Vector Group Ltd (NYSE:VGR) has faced falling interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of funds that elected to cut their positions entirely by the end of the third quarter. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management dumped the largest investment of all the hedgies tracked by Insider Monkey, worth an estimated $1.3 million in stock, and Peter Muller’s PDT Partners was right behind this move, as the fund said goodbye to about $1.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Vector Group Ltd (NYSE:VGR) but similarly valued. We will take a look at Caretrus REIT Inc (NASDAQ:CTRE), Forward Air Corporation (NASDAQ:FWRD), FormFactor, Inc. (NASDAQ:FORM), and Patterson Companies, Inc. (NASDAQ:PDCO). This group of stocks’ market valuations match VGR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CTRE | 13 | 69296 | -3 |
| FWRD | 20 | 137214 | -1 |
| FORM | 22 | 128673 | 3 |
| PDCO | 25 | 182608 | 3 |
| Average | 20 | 129448 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $129 million. That figure was $204 million in VGR’s case. Patterson Companies, Inc. (NASDAQ:PDCO) is the most popular stock in this table. On the other hand Caretrus REIT Inc (NASDAQ:CTRE) is the least popular one with only 13 bullish hedge fund positions. Vector Group Ltd (NYSE:VGR) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately VGR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); VGR investors were disappointed as the stock returned -30.7% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
