Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 8 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 9 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Vitamin Shoppe Inc (NYSE:VSI).
Is Vitamin Shoppe Inc (NYSE:VSI) a superb investment right now? The best stock pickers are betting on the stock. The number of long hedge fund positions rose by 5 recently. Our calculations also showed that VSI 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.
Eric Singer of VIEX Capital
We’re going to analyze the recent hedge fund action encompassing Vitamin Shoppe Inc (NYSE:VSI).
How have hedgies been trading Vitamin Shoppe Inc (NYSE:VSI)?
Heading into the second quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the fourth quarter of 2018. By comparison, 10 hedge funds held shares or bullish call options in VSI a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Himanshu H. Shah’s Shah Capital Management has the number one position in Vitamin Shoppe Inc (NYSE:VSI), worth close to $29.4 million, comprising 15.3% of its total 13F portfolio. Sitting at the No. 2 spot is D E Shaw, led by D. E. Shaw, holding a $5.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions encompass Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Jim Simons’s Renaissance Technologies and Matthew Hulsizer’s PEAK6 Capital Management.
As aggregate interest increased, specific money managers have jumped into Vitamin Shoppe Inc (NYSE:VSI) headfirst. PEAK6 Capital Management, managed by Matthew Hulsizer, created the largest position in Vitamin Shoppe Inc (NYSE:VSI). PEAK6 Capital Management had $1.4 million invested in the company at the end of the quarter. Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital also made a $1 million investment in the stock during the quarter. The other funds with new positions in the stock are Eric Singer’s VIEX Capital Advisors, Ken Griffin’s Citadel Investment Group, and Bradley Louis Radoff’s Fondren Management.
Let’s go over hedge fund activity in other stocks similar to Vitamin Shoppe Inc (NYSE:VSI). We will take a look at Medallion Financial Corp. (NASDAQ:MFIN), Medley Capital Corp (NYSE:MCC), Mackinac Financial Corporation (NASDAQ:MFNC), and Energous Corporation (NASDAQ:WATT). This group of stocks’ market caps resemble VSI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MFIN | 8 | 5212 | -2 |
| MCC | 9 | 19308 | 0 |
| MFNC | 7 | 14523 | 2 |
| WATT | 4 | 3055 | 0 |
| Average | 7 | 10525 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $51 million in VSI’s case. Medley Capital Corp (NYSE:MCC) is the most popular stock in this table. On the other hand Energous Corporation (NASDAQ:WATT) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Vitamin Shoppe Inc (NYSE:VSI) 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 VSI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on VSI were disappointed as the stock returned -48.3% 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.
