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. Keeping this in mind, let’s take a look at whether Vicor Corp (NASDAQ:VICR) is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Hedge fund interest in Vicor Corp (NASDAQ:VICR) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare VICR to other stocks including Adtalem Global Education Inc. (NYSE:ATGE), Fastly, Inc. (NYSE:FSLY), and Hope Bancorp, Inc. (NASDAQ:HOPE) to get a better sense of its popularity.
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 monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.
Richard Driehaus of Driehaus Capital
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. Now let’s review the recent hedge fund action encompassing Vicor Corp (NASDAQ:VICR).
Hedge fund activity in Vicor Corp (NASDAQ:VICR)
Heading into the first quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in VICR a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Shelter Haven Capital Management, managed by Jerry Kochanski, holds the largest position in Vicor Corp (NASDAQ:VICR). Shelter Haven Capital Management has a $13.6 million position in the stock, comprising 6.5% of its 13F portfolio. The second largest stake is held by Manatuck Hill Partners, led by Mark Broach, holding a $8.6 million position; the fund has 4.5% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism encompass George McCabe’s Portolan Capital Management, Richard Driehaus’s Driehaus Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Shelter Haven Capital Management allocated the biggest weight to Vicor Corp (NASDAQ:VICR), around 6.48% of its 13F portfolio. Manatuck Hill Partners is also relatively very bullish on the stock, designating 4.49 percent of its 13F equity portfolio to VICR.
Because Vicor Corp (NASDAQ:VICR) has faced falling interest from the smart money, it’s safe to say that there is a sect of money managers who were dropping their entire stakes last quarter. At the top of the heap, Adam Usdan’s Trellus Management Company dropped the biggest stake of the “upper crust” of funds watched by Insider Monkey, comprising close to $3.8 million in stock. Renaissance Technologies, also sold off its stock, about $3.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to Vicor Corp (NASDAQ:VICR). We will take a look at Adtalem Global Education Inc. (NYSE:ATGE), Fastly, Inc. (NYSE:FSLY), Hope Bancorp, Inc. (NASDAQ:HOPE), and Tricida, Inc. (NASDAQ:TCDA). All of these stocks’ market caps match VICR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ATGE | 20 | 277855 | -6 |
| FSLY | 19 | 164296 | 3 |
| HOPE | 19 | 86079 | 5 |
| TCDA | 24 | 780285 | 7 |
| Average | 20.5 | 327129 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $327 million. That figure was $39 million in VICR’s case. Tricida, Inc. (NASDAQ:TCDA) is the most popular stock in this table. On the other hand Fastly, Inc. (NYSE:FSLY) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Vicor Corp (NASDAQ:VICR) is even less popular than FSLY. Hedge funds clearly dropped the ball on VICR as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 beat the market by 4.2 percentage points. A small number of hedge funds were also right about betting on VICR as the stock returned -8% during the same time period and outperformed the market by an even larger margin.
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.
