The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Varonis Systems Inc (NASDAQ:VRNS) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Varonis Systems Inc (NASDAQ:VRNS) shareholders have witnessed an increase in activity from the world’s largest hedge funds of late. Varonis Systems Inc (NASDAQ:VRNS) was in 28 hedge funds’ portfolios at the end of June. The all time high for this statistics is 26. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that VRNS 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.
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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Gil Simon of SoMa Equity Partners
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. Keeping this in mind let’s analyze the fresh hedge fund action surrounding Varonis Systems Inc (NASDAQ:VRNS).
What does smart money think about Varonis Systems Inc (NASDAQ:VRNS)?
At Q2’s end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 40% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in VRNS over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Eric Bannasch’s Cadian Capital has the number one position in Varonis Systems Inc (NASDAQ:VRNS), worth close to $228.4 million, amounting to 9.5% of its total 13F portfolio. The second most bullish fund manager is SoMa Equity Partners, led by Gil Simon, holding a $115 million position; the fund has 4.5% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish consist of David Thomas’s Atalan Capital, Brett Barakett’s Tremblant Capital and John Brennan’s Sirios Capital Management. In terms of the portfolio weights assigned to each position North Run Capital allocated the biggest weight to Varonis Systems Inc (NASDAQ:VRNS), around 13.23% of its 13F portfolio. Cadian Capital is also relatively very bullish on the stock, designating 9.5 percent of its 13F equity portfolio to VRNS.
Consequently, key hedge funds have been driving this bullishness. Renaissance Technologies, initiated the biggest position in Varonis Systems Inc (NASDAQ:VRNS). Renaissance Technologies had $14.4 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also made a $7.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Zach Schreiber’s Point State Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s also examine hedge fund activity in other stocks similar to Varonis Systems Inc (NASDAQ:VRNS). These stocks are Insmed Incorporated (NASDAQ:INSM), MGIC Investment Corporation (NYSE:MTG), NorthWestern Corporation (NYSE:NWE), Mantech International Corp (NASDAQ:MANT), White Mountains Insurance Group Ltd (NYSE:WTM), Avnet, Inc. (NASDAQ:AVT), and Burning Rock Biotech Limited (NASDAQ:BNR). This group of stocks’ market caps are closest to VRNS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INSM | 30 | 613700 | 10 |
| MTG | 40 | 262992 | -1 |
| NWE | 22 | 96622 | 3 |
| MANT | 16 | 29262 | -1 |
| WTM | 11 | 116150 | -5 |
| AVT | 29 | 553892 | 5 |
| BNR | 18 | 240649 | 18 |
| Average | 23.7 | 273324 | 4.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.7 hedge funds with bullish positions and the average amount invested in these stocks was $273 million. That figure was $605 million in VRNS’s case. MGIC Investment Corporation (NYSE:MTG) is the most popular stock in this table. On the other hand White Mountains Insurance Group Ltd (NYSE:WTM) is the least popular one with only 11 bullish hedge fund positions. Varonis Systems Inc (NASDAQ:VRNS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VRNS is 69.3. 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. 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 still beat the market by 17.7 percentage points. Hedge funds were also right about betting on VRNS as the stock returned 28.5% during Q3 (through September 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
