Is 21Vianet Group Inc (NASDAQ:VNET) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
21Vianet Group Inc (NASDAQ:VNET) investors should pay attention to a decrease in hedge fund sentiment in recent months. VNET was in 12 hedge funds’ portfolios at the end of September. There were 17 hedge funds in our database with VNET holdings at the end of the previous quarter. Our calculations also showed that VNET 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. Let’s analyze the new hedge fund action regarding 21Vianet Group Inc (NASDAQ:VNET).
What does smart money think about 21Vianet Group Inc (NASDAQ:VNET)?
Heading into the fourth quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VNET over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
More specifically, Sylebra Capital Management was the largest shareholder of 21Vianet Group Inc (NASDAQ:VNET), with a stake worth $21 million reported as of the end of September. Trailing Sylebra Capital Management was Dalton Investments, which amassed a stake valued at $11.6 million. Renaissance Technologies, D E Shaw, and Two Sigma Advisors 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 Dalton Investments allocated the biggest weight to 21Vianet Group Inc (NASDAQ:VNET), around 7.3% of its 13F portfolio. Sylebra Capital Management is also relatively very bullish on the stock, setting aside 0.92 percent of its 13F equity portfolio to VNET.
Judging by the fact that 21Vianet Group Inc (NASDAQ:VNET) has witnessed a decline in interest from the smart money, logic holds that there lies a certain “tier” of hedgies that slashed their positions entirely heading into Q4. Intriguingly, Israel Englander’s Millennium Management dumped the biggest position of the 750 funds tracked by Insider Monkey, worth an estimated $0.4 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also said goodbye to its stock, about $0.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 5 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to 21Vianet Group Inc (NASDAQ:VNET). These stocks are G1 Therapeutics, Inc. (NASDAQ:GTHX), German American Bancorp., Inc. (NASDAQ:GABC), Chatham Lodging Trust (NYSE:CLDT), and Cara Therapeutics Inc (NASDAQ:CARA). This group of stocks’ market values are similar to VNET’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GTHX | 14 | 48901 | 4 |
| GABC | 6 | 14967 | -1 |
| CLDT | 8 | 55426 | 0 |
| CARA | 11 | 104858 | 3 |
| Average | 9.75 | 56038 | 1.5 |
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 $56 million. That figure was $48 million in VNET’s case. G1 Therapeutics, Inc. (NASDAQ:GTHX) is the most popular stock in this table. On the other hand German American Bancorp., Inc. (NASDAQ:GABC) is the least popular one with only 6 bullish hedge fund positions. 21Vianet Group Inc (NASDAQ:VNET) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately VNET wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on VNET were disappointed as the stock returned -11.2% 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
