Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Index ETFs returned approximately 27.5% through the end of November (including dividend payments). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ consensus stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Verb Technology Company, Inc. (NASDAQ:VERB).
Verb Technology Company, Inc. (NASDAQ:VERB) was in 4 hedge funds’ portfolios at the end of the third quarter of 2019. VERB has seen an increase in hedge fund interest in recent months. There were 2 hedge funds in our database with VERB holdings at the end of the previous quarter. Our calculations also showed that VERB 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.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to go over the new hedge fund action surrounding Verb Technology Company, Inc. (NASDAQ:VERB).
How are hedge funds trading Verb Technology Company, Inc. (NASDAQ:VERB)?
At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 100% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VERB over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Millennium Management, managed by Israel Englander, holds the number one position in Verb Technology Company, Inc. (NASDAQ:VERB). Millennium Management has a $0.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Hudson Bay Capital Management, led by Sander Gerber, holding a $0 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish encompass Ken Griffin’s Citadel Investment Group, Bart Baum’s Ionic Capital Management and . In terms of the portfolio weights assigned to each position Ionic Capital Management allocated the biggest weight to Verb Technology Company, Inc. (NASDAQ:VERB), around 0.0014% of its 13F portfolio. Hudson Bay Capital Management is also relatively very bullish on the stock, designating 0.001 percent of its 13F equity portfolio to VERB.
Now, some big names have jumped into Verb Technology Company, Inc. (NASDAQ:VERB) headfirst. Citadel Investment Group, managed by Ken Griffin, created the largest position in Verb Technology Company, Inc. (NASDAQ:VERB). Citadel Investment Group had $0 million invested in the company at the end of the quarter. Bart Baum’s Ionic Capital Management also initiated a $0 million position during the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Verb Technology Company, Inc. (NASDAQ:VERB) but similarly valued. These stocks are Trinity Biotech plc (NASDAQ:TRIB), Estre Ambiental, Inc. (NASDAQ:ESTR), Ossen Innovation Co Ltd (NASDAQ:OSN), and Clearside Biomedical, Inc. (NASDAQ:CLSD). This group of stocks’ market values are closest to VERB’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TRIB | 4 | 1921 | 0 |
| ESTR | 6 | 876 | 0 |
| OSN | 1 | 152 | 0 |
| CLSD | 2 | 191 | -2 |
| Average | 3.25 | 785 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.25 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $0 million in VERB’s case. Estre Ambiental, Inc. (NASDAQ:ESTR) is the most popular stock in this table. On the other hand Ossen Innovation Co Ltd (NASDAQ:OSN) is the least popular one with only 1 bullish hedge fund positions. Verb Technology Company, Inc. (NASDAQ:VERB) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately VERB wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on VERB were disappointed as the stock returned -17.1% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.