The market has been volatile in the last 6 months as the Federal Reserve continued its rate hikes and then abruptly reversed its stance and uncertainty looms over trade negotiations with China. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 9 percentage points. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, though some funds increased their exposure dramatically at the end of Q4 and the beginning of Q1. In this article, we analyze what the smart money thinks of Vector Group Ltd (NYSE:VGR) and find out how it is affected by hedge funds’ moves.
Is Vector Group Ltd (NYSE:VGR) an exceptional investment right now? The best stock pickers are taking an optimistic view. The number of long hedge fund positions improved by 2 lately. Our calculations also showed that VGR isn’t among the 30 most popular stocks among hedge funds. VGR was in 22 hedge funds’ portfolios at the end of the first quarter of 2019. There were 20 hedge funds in our database with VGR positions at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Noam Gottesman, GLG Partners
Let’s take a look at the recent hedge fund action encompassing Vector Group Ltd (NYSE:VGR).
How have hedgies been trading Vector Group Ltd (NYSE:VGR)?
At Q1’s end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the fourth quarter of 2018. By comparison, 15 hedge funds held shares or bullish call options in VGR a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Vector Group Ltd (NYSE:VGR), which was worth $100.9 million at the end of the first quarter. On the second spot was GLG Partners which amassed $17.2 million worth of shares. Moreover, Citadel Investment Group, Millennium Management, and Two Sigma Advisors were also bullish on Vector Group Ltd (NYSE:VGR), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, key hedge funds have been driving this bullishness. HBK Investments, managed by David Costen Haley, established the most valuable position in Vector Group Ltd (NYSE:VGR). HBK Investments had $0.9 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also initiated a $0.5 million position during the quarter. The following funds were also among the new VGR investors: Alec Litowitz and Ross Laser’s Magnetar Capital and Andrew Weiss’s Weiss Asset Management.
Let’s go over hedge fund activity in other stocks similar to Vector Group Ltd (NYSE:VGR). These stocks are trivago N.V. (NASDAQ:TRVG), Rush Enterprises, Inc. (NASDAQ:RUSHB), BP Midstream Partners LP (NYSE:BPMP), and Talend S.A. (NASDAQ:TLND). This group of stocks’ market caps match VGR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TRVG | 11 | 120462 | -2 |
| RUSHB | 3 | 37215 | 0 |
| BPMP | 6 | 45284 | 3 |
| TLND | 32 | 444990 | 5 |
| Average | 13 | 161988 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $162 million. That figure was $172 million in VGR’s case. Talend S.A. (NASDAQ:TLND) is the most popular stock in this table. On the other hand Rush Enterprises, Inc. (NASDAQ:RUSHB) is the least popular one with only 3 bullish hedge fund positions. Vector Group Ltd (NYSE:VGR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately VGR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on VGR were disappointed as the stock returned -15.2% during the same 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
