Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the third quarter we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards 21Vianet Group Inc (NASDAQ:VNET) to find out whether it was one of their high conviction long-term ideas.
Is 21Vianet Group Inc worth your attention right now? Investors who are in the know are taking a pessimistic view. The number of long hedge fund positions was trimmed by 2 lately. At the end of this article we will also compare VNET to other stocks, including Galapagos NV (ADR) (NASDAQ:GLPG), Commercial Metals Company (NYSE:CMC), and Universal Display Corporation (NASDAQ:OLED) to get a better sense of its popularity.
In the eyes of most market participants, hedge funds are assumed to be worthless, outdated investment tools of years past. While there are more than 8000 funds in operation at the moment, Our researchers hone in on the top tier of this group, approximately 700 funds. These money managers oversee most of all hedge funds’ total capital, and by keeping an eye on their matchless equity investments, Insider Monkey has spotted a number of investment strategies that have historically outperformed Mr. Market. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Now, we’re going to take a look at the key action regarding 21Vianet Group Inc (NASDAQ:VNET).
Hedge fund activity in 21Vianet Group Inc (NASDAQ:VNET)
At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 12% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Daniel S. Och’s OZ Management has the most valuable position in 21Vianet Group Inc (NASDAQ:VNET), worth close to $44.4 million, comprising 0.2% of its total 13F portfolio. The second most bullish fund manager is Hillhouse Capital Management, led by Lei Zhang, holding a $38.9 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish encompass Frank Brosens’s Taconic Capital, Daniel Gold’s QVT Financial and Glen Kacher’s Light Street Capital.
Seeing as 21Vianet Group Inc (NASDAQ:VNET) has experienced a declination in interest from the smart money, it’s safe to say that there is a sect of fund managers that elected to cut their entire stakes in the third quarter. Intriguingly, Brian Taylor’s Pine River Capital Management sold off the biggest position of all the hedgies followed by Insider Monkey, totaling about $5.7 million in stock. Rob Romero’s fund, Connective Capital Management, also dropped its stock, about $0.9 million worth of VNET shares. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as 21Vianet Group Inc (NASDAQ:VNET) but similarly valued. These stocks are Galapagos NV (ADR) (NASDAQ:GLPG), Commercial Metals Company (NYSE:CMC), Universal Display Corporation (NASDAQ:OLED), and HubSpot Inc (NYSE:HUBS). All of these stocks’ market caps are closest to VNET’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GLPG | 11 | 97198 | -3 |
| CMC | 20 | 88632 | -4 |
| OLED | 14 | 235837 | 1 |
| HUBS | 10 | 52862 | 3 |
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $119 million. That figure was $209 million in VNET’s case. Commercial Metals Company (NYSE:CMC) is the most popular stock in this table, while HubSpot Inc (NYSE:HUBS) is the laggard with only 10 bullish hedge fund positions. 21Vianet Group Inc (NASDAQ:VNET) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, yet we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CMC might be a better candidate to consider a long position.
