Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Virgin Galactic Holdings, Inc. (NYSE:SPCE).
Is Virgin Galactic Holdings, Inc. (NYSE:SPCE) a healthy stock for your portfolio? Hedge funds are turning bullish. The number of bullish hedge fund bets rose by 6 recently. Our calculations also showed that SPCE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
To most traders, hedge funds are viewed as slow, outdated investment vehicles of years past. While there are greater than 8000 funds trading at present, We look at the upper echelon of this group, approximately 850 funds. These hedge fund managers shepherd bulk of all hedge funds’ total capital, and by monitoring their unrivaled equity investments, Insider Monkey has uncovered many investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Aaron Cowen of Suvretta Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the fresh hedge fund action regarding Virgin Galactic Holdings, Inc. (NYSE:SPCE).
What have hedge funds been doing with Virgin Galactic Holdings, Inc. (NYSE:SPCE)?
At the end of the fourth quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SPCE over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Suvretta Capital Management, managed by Aaron Cowen, holds the largest position in Virgin Galactic Holdings, Inc. (NYSE:SPCE). Suvretta Capital Management has a $63.5 million position in the stock, comprising 1.4% of its 13F portfolio. Sitting at the No. 2 spot is Samlyn Capital, managed by Robert Pohly, which holds a $48.4 million position; the fund has 1% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions contain Guy Shahar’s DSAM Partners, Mark Hart III’s Corriente Advisors and Peter S. Park’s Park West Asset Management. In terms of the portfolio weights assigned to each position Corriente Advisors allocated the biggest weight to Virgin Galactic Holdings, Inc. (NYSE:SPCE), around 14.96% of its 13F portfolio. DSAM Partners is also relatively very bullish on the stock, dishing out 6.69 percent of its 13F equity portfolio to SPCE.
As industrywide interest jumped, key money managers were breaking ground themselves. DSAM Partners, managed by Guy Shahar, assembled the largest position in Virgin Galactic Holdings, Inc. (NYSE:SPCE). DSAM Partners had $29.1 million invested in the company at the end of the quarter. Mark Hart III’s Corriente Advisors also made a $27.9 million investment in the stock during the quarter. The following funds were also among the new SPCE investors: John M. Angelo and Michael L. Gordon’s Angelo Gordon & Co, Peter S. Park’s Park West Asset Management, and Spencer M. Waxman’s Shannon River Fund Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Virgin Galactic Holdings, Inc. (NYSE:SPCE) but similarly valued. These stocks are NMI Holdings Inc (NASDAQ:NMIH), Synthorx, Inc.(NASDAQ:THOR), Hilltop Holdings Inc. (NYSE:HTH), and Argo Group International Holdings, Ltd. (NYSE:ARGO). This group of stocks’ market caps resemble SPCE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NMIH | 21 | 263260 | 1 |
| THOR | 25 | 1284990 | 18 |
| HTH | 19 | 99488 | -1 |
| ARGO | 19 | 184829 | 3 |
| Average | 21 | 458142 | 5.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $458 million. That figure was $285 million in SPCE’s case. Synthorx, Inc. (NASDAQ:THOR) is the most popular stock in this table. On the other hand Hilltop Holdings Inc. (NYSE:HTH) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Virgin Galactic Holdings, Inc. (NYSE:SPCE) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but still managed to beat the market by 4.2 percentage points. Hedge funds were also right about betting on SPCE as the stock returned 23.8% so far in 2020 (through April 6th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.