In this article we will take a look at whether hedge funds think Vereit Inc (NYSE:VER) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Vereit Inc (NYSE:VER) investors should pay attention to a decrease in activity from the world’s largest hedge funds lately. VER was in 18 hedge funds’ portfolios at the end of the first quarter of 2020. There were 28 hedge funds in our database with VER holdings at the end of the previous quarter. Our calculations also showed that VER isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 58 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 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.
Ricky Sandler of Eminence Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s review the new hedge fund action encompassing Vereit Inc (NYSE:VER).
How are hedge funds trading Vereit Inc (NYSE:VER)?
Heading into the second quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -36% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in VER over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Eminence Capital was the largest shareholder of Vereit Inc (NYSE:VER), with a stake worth $126.7 million reported as of the end of September. Trailing Eminence Capital was Citadel Investment Group, which amassed a stake valued at $71.7 million. Redwood Capital Management, Glendon Capital Management, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Glendon Capital Management allocated the biggest weight to Vereit Inc (NYSE:VER), around 13.22% of its 13F portfolio. Redwood Capital Management is also relatively very bullish on the stock, earmarking 8.01 percent of its 13F equity portfolio to VER.
Seeing as Vereit Inc (NYSE:VER) has experienced bearish sentiment from hedge fund managers, we can see that there were a few money managers who sold off their entire stakes by the end of the first quarter. Interestingly, Jeffrey Tannenbaum’s Fir Tree said goodbye to the biggest investment of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $82.6 million in stock. Renaissance Technologies, also said goodbye to its stock, about $42.4 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 10 funds by the end of the first quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Vereit Inc (NYSE:VER) but similarly valued. We will take a look at Healthcare Trust Of America Inc (NYSE:HTA), Exelixis, Inc. (NASDAQ:EXEL), Apartment Investment and Management Co. (NYSE:AIV), and Jones Lang LaSalle Inc (NYSE:JLL). This group of stocks’ market valuations resemble VER’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HTA | 16 | 106529 | 5 |
| EXEL | 30 | 935037 | 7 |
| AIV | 21 | 395202 | -3 |
| JLL | 26 | 660081 | -4 |
| Average | 23.25 | 524212 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $524 million. That figure was $315 million in VER’s case. Exelixis, Inc. (NASDAQ:EXEL) is the most popular stock in this table. On the other hand Healthcare Trust Of America Inc (NYSE:HTA) is the least popular one with only 16 bullish hedge fund positions. Vereit Inc (NYSE:VER) is not the least popular stock in this group but hedge fund interest is still below average. 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 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. A small number of hedge funds were also right about betting on VER as the stock returned 36.5% during the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
