“The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak,” are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Varonis Systems Inc (NASDAQ:VRNS) and see how it was affected.
Is Varonis Systems Inc (NASDAQ:VRNS) an outstanding stock to buy now? The smart money is in a bullish mood. The number of long hedge fund positions went up by 4 lately. Our calculations also showed that VRNS isn’t among the 30 most popular stocks among hedge funds.
Today there are plenty of methods stock traders put to use to value publicly traded companies. A pair of the most underrated methods are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the elite money managers can outpace the broader indices by a significant amount (see the details here).
Let’s take a peek at the key hedge fund action encompassing Varonis Systems Inc (NASDAQ:VRNS).
How have hedgies been trading Varonis Systems Inc (NASDAQ:VRNS)?
At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the previous quarter. The graph below displays the number of hedge funds with bullish position in VRNS over the last 15 quarters. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, Point72 Asset Management was the largest shareholder of Varonis Systems Inc (NASDAQ:VRNS), with a stake worth $47.5 million reported as of the end of March. Trailing Point72 Asset Management was SoMa Equity Partners, which amassed a stake valued at $35.8 million. Cadian Capital, Atalan Capital, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, key hedge funds have been driving this bullishness. SoMa Equity Partners, managed by Gil Simon, initiated the biggest position in Varonis Systems Inc (NASDAQ:VRNS). SoMa Equity Partners had $35.8 million invested in the company at the end of the quarter. Eric Bannasch’s Cadian Capital also made a $29.9 million investment in the stock during the quarter. The other funds with new positions in the stock are David Thomas’s Atalan Capital, Brett Barakett’s Tremblant Capital, and Thomas Ellis and Todd Hammer’s North Run Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Varonis Systems Inc (NASDAQ:VRNS). We will take a look at Euronav NV (NYSE:EURN), M.D.C. Holdings, Inc. (NYSE:MDC), JELD-WEN Holding, Inc. (NYSE:JELD), and Solaredge Technologies Inc (NASDAQ:SEDG). This group of stocks’ market values are closest to VRNS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EURN | 11 | 111173 | 0 |
| MDC | 17 | 102582 | 1 |
| JELD | 21 | 327610 | 5 |
| SEDG | 22 | 115277 | 8 |
| Average | 17.75 | 164161 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $164 million. That figure was $273 million in VRNS’s case. Solaredge Technologies Inc (NASDAQ:SEDG) is the most popular stock in this table. On the other hand Euronav NV (NYSE:EURN) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Varonis Systems Inc (NASDAQ:VRNS) 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. Hedge funds were also right about betting on VRNS as the stock returned 7.2% during the same period 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.
Disclosure: None. This article was originally published at Insider Monkey.
