While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Village Farms International, Inc. (NASDAQ:VFF).
Is Village Farms International, Inc. (NASDAQ:VFF) the right investment to pursue these days? Investors who are in the know are in a bullish mood. The number of long hedge fund positions inched up by 1 lately. Our calculations also showed that VFF 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.
Why do we pay any attention at all to hedge fund sentiment? 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 check out the latest hedge fund action encompassing Village Farms International, Inc. (NASDAQ:VFF).
Hedge fund activity in Village Farms International, Inc. (NASDAQ:VFF)
At Q3’s end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards VFF over the last 17 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
More specifically, Two Sigma Advisors was the largest shareholder of Village Farms International, Inc. (NASDAQ:VFF), with a stake worth $4.1 million reported as of the end of September. Trailing Two Sigma Advisors was Millennium Management, which amassed a stake valued at $0.2 million. Signition LP, Gotham Asset Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Signition LP allocated the biggest weight to Village Farms International, Inc. (NASDAQ:VFF), around 0.77% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to VFF.
Consequently, specific money managers were breaking ground themselves. Gotham Asset Management, managed by Joel Greenblatt, established the most outsized position in Village Farms International, Inc. (NASDAQ:VFF). Gotham Asset Management had $0.1 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.1 million position during the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Village Farms International, Inc. (NASDAQ:VFF) but similarly valued. These stocks are Heritage Insurance Holdings Inc (NYSE:HRTG), Oxford Immunotec Global PLC (NASDAQ:OXFD), Pennsylvania Real Estate Investment Trust (NYSE:PEI), and Vishay Precision Group Inc (NYSE:VPG). This group of stocks’ market valuations are similar to VFF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HRTG | 9 | 48243 | -5 |
| OXFD | 19 | 194524 | 3 |
| PEI | 5 | 8826 | -1 |
| VPG | 15 | 137650 | 1 |
| Average | 12 | 97311 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $5 million in VFF’s case. Oxford Immunotec Global PLC (NASDAQ:OXFD) is the most popular stock in this table. On the other hand Pennsylvania Real Estate Investment Trust (NYSE:PEI) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Village Farms International, Inc. (NASDAQ:VFF) is even less popular than PEI. Hedge funds dodged a bullet by taking a bearish stance towards VFF. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately VFF wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); VFF investors were disappointed as the stock returned -26.9% 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
