Is Vocera Communications Inc (NYSE:VCRA) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Vocera Communications Inc (NYSE:VCRA) was in 9 hedge funds’ portfolios at the end of September. VCRA investors should pay attention to a decrease in enthusiasm from smart money in recent months. There were 14 hedge funds in our database with VCRA positions at the end of the previous quarter. Our calculations also showed that VCRA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Paul Marshall of Marshall Wace
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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s review the latest hedge fund action encompassing Vocera Communications Inc (NYSE:VCRA).
Hedge fund activity in Vocera Communications Inc (NYSE:VCRA)
Heading into the fourth quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -36% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards VCRA over the last 17 quarters. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
More specifically, Sectoral Asset Management was the largest shareholder of Vocera Communications Inc (NYSE:VCRA), with a stake worth $11.8 million reported as of the end of September. Trailing Sectoral Asset Management was Renaissance Technologies, which amassed a stake valued at $3.7 million. Marshall Wace, Perceptive Advisors, 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 Sectoral Asset Management allocated the biggest weight to Vocera Communications Inc (NYSE:VCRA), around 2.04% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, dishing out 0.07 percent of its 13F equity portfolio to VCRA.
Seeing as Vocera Communications Inc (NYSE:VCRA) has faced a decline in interest from the smart money, it’s easy to see that there was a specific group of hedge funds who sold off their positions entirely heading into Q4. At the top of the heap, Marcelo Desio’s Lucha Capital Management cut the largest investment of the 750 funds watched by Insider Monkey, comprising about $7.6 million in stock. Vishal Saluja and Pham Quang’s fund, Endurant Capital Management, also said goodbye to its stock, about $6.5 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 5 funds heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Vocera Communications Inc (NYSE:VCRA) but similarly valued. We will take a look at Tupperware Brands Corporation (NYSE:TUP), Eagle Pharmaceuticals Inc (NASDAQ:EGRX), Partner Communications Company Ltd (NASDAQ:PTNR), and Washington Prime Group Inc. (NYSE:WPG). This group of stocks’ market caps are closest to VCRA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TUP | 14 | 112420 | -3 |
| EGRX | 16 | 146879 | -4 |
| PTNR | 1 | 12616 | -1 |
| WPG | 5 | 9261 | -6 |
| Average | 9 | 70294 | -3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $27 million in VCRA’s case. Eagle Pharmaceuticals Inc (NASDAQ:EGRX) is the most popular stock in this table. On the other hand Partner Communications Company Ltd (NASDAQ:PTNR) is the least popular one with only 1 bullish hedge fund positions. Vocera Communications Inc (NYSE:VCRA) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately VCRA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); VCRA investors were disappointed as the stock returned -12% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
