“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Vericel Corp (NASDAQ:VCEL).
Vericel Corp (NASDAQ:VCEL) shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. VCEL was in 25 hedge funds’ portfolios at the end of March. There were 19 hedge funds in our database with VCEL holdings at the end of the previous quarter. Our calculations also showed that VCEL isn’t among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s review the fresh hedge fund action regarding Vericel Corp (NASDAQ:VCEL).
What does the smart money think about Vericel Corp (NASDAQ:VCEL)?
Heading into the second quarter of 2019, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 32% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VCEL over the last 15 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
The largest stake in Vericel Corp (NASDAQ:VCEL) was held by Consonance Capital Management, which reported holding $75.1 million worth of stock at the end of March. It was followed by Deerfield Management with a $29.6 million position. Other investors bullish on the company included Driehaus Capital, Archon Capital Management, and AQR Capital Management.
Consequently, some big names have jumped into Vericel Corp (NASDAQ:VCEL) headfirst. Point72 Asset Management, managed by Steve Cohen, established the largest position in Vericel Corp (NASDAQ:VCEL). Point72 Asset Management had $7.1 million invested in the company at the end of the quarter. John Osterweis’s Osterweis Capital Management also made a $5.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Oleg Nodelman’s EcoR1 Capital, and Vishal Saluja and Pham Quang’s Endurant Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Vericel Corp (NASDAQ:VCEL) but similarly valued. We will take a look at Omega Flex, Inc. (NASDAQ:OFLX), Sapiens International Corporation N.V. (NASDAQ:SPNS), Enova International Inc (NYSE:ENVA), and Och-Ziff Capital Management Group Inc. (NYSE:OZM). This group of stocks’ market valuations are closest to VCEL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OFLX | 4 | 10420 | -1 |
| SPNS | 7 | 14329 | 4 |
| ENVA | 20 | 156642 | -3 |
| OZM | 8 | 57143 | -1 |
| Average | 9.75 | 59634 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $200 million in VCEL’s case. Enova International Inc (NYSE:ENVA) is the most popular stock in this table. On the other hand Omega Flex, Inc. (NASDAQ:OFLX) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Vericel Corp (NASDAQ:VCEL) is more popular among hedge funds. 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 VCEL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on VCEL were disappointed as the stock returned -11% 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 in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
