We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (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. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on Verint Systems Inc. (NASDAQ:VRNT).
Is Verint Systems Inc. (NASDAQ:VRNT) a buy here? Prominent investors are getting less optimistic. The number of long hedge fund positions went down by 7 in recent months. Our calculations also showed that VRNT 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 the average investor there are dozens of indicators stock market investors employ to appraise their stock investments. A couple of the most under-the-radar indicators are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can outperform the broader indices by a healthy amount (see the details here).
Matthew Hulsizer of PEAK6 Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. Now we’re going to take a look at the recent hedge fund action surrounding Verint Systems Inc. (NASDAQ:VRNT).
What have hedge funds been doing with Verint Systems Inc. (NASDAQ:VRNT)?
At the end of the fourth quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -32% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in VRNT a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, RGM Capital held the most valuable stake in Verint Systems Inc. (NASDAQ:VRNT), which was worth $133.9 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $84.7 million worth of shares. Cardinal Capital, GLG Partners, 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 RGM Capital allocated the biggest weight to Verint Systems Inc. (NASDAQ:VRNT), around 7.65% of its 13F portfolio. Cardinal Capital is also relatively very bullish on the stock, earmarking 0.7 percent of its 13F equity portfolio to VRNT.
Judging by the fact that Verint Systems Inc. (NASDAQ:VRNT) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of money managers who sold off their positions entirely by the end of the third quarter. It’s worth mentioning that Amish Mehta’s SQN Investors sold off the largest stake of all the hedgies followed by Insider Monkey, totaling close to $55.6 million in stock. Renaissance Technologies, also dumped its stock, about $5.1 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 7 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Verint Systems Inc. (NASDAQ:VRNT). These stocks are Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), Antero Midstream Corp (NYSE:AM), OneConnect Financial Technology Co., Ltd. (NYSE:OCFT), and Community Bank System, Inc. (NYSE:CBU). This group of stocks’ market caps are similar to VRNT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CBRL | 24 | 155764 | 0 |
| AM | 14 | 144307 | -2 |
| OCFT | 9 | 14809 | 9 |
| CBU | 10 | 18225 | -5 |
| Average | 14.25 | 83276 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $286 million in VRNT’s case. Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) is the most popular stock in this table. On the other hand OneConnect Financial Technology Co., Ltd. (NYSE:OCFT) is the least popular one with only 9 bullish hedge fund positions. Verint Systems Inc. (NASDAQ:VRNT) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately VRNT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on VRNT were disappointed as the stock returned -25.2% during the same time 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 many of these stocks already outperformed the market so far this year.
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.
