We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Veeco Instruments Inc. (NASDAQ:VECO).
Veeco Instruments Inc. (NASDAQ:VECO) has experienced an increase in enthusiasm from smart money in recent months. VECO was in 11 hedge funds’ portfolios at the end of the second quarter of 2019. There were 10 hedge funds in our database with VECO positions at the end of the previous quarter. Our calculations also showed that VECO isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the new hedge fund action encompassing Veeco Instruments Inc. (NASDAQ:VECO).
How have hedgies been trading Veeco Instruments Inc. (NASDAQ:VECO)?
At the end of the second quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VECO over the last 16 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Lynrock Lake was the largest shareholder of Veeco Instruments Inc. (NASDAQ:VECO), with a stake worth $87.9 million reported as of the end of March. Trailing Lynrock Lake was Fisher Asset Management, which amassed a stake valued at $16 million. D E Shaw, Renaissance Technologies, and Royce & Associates were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, key money managers have jumped into Veeco Instruments Inc. (NASDAQ:VECO) headfirst. Nishkama Capital, managed by Ravee Mehta, created the largest position in Veeco Instruments Inc. (NASDAQ:VECO). Nishkama Capital had $0.9 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.6 million position during the quarter. The only other fund with a brand new VECO position is Michael Gelband’s ExodusPoint Capital.
Let’s go over hedge fund activity in other stocks similar to Veeco Instruments Inc. (NASDAQ:VECO). These stocks are Koppers Holdings Inc. (NYSE:KOP), Heritage-Crystal Clean, Inc. (NASDAQ:HCCI), Pzena Investment Management Inc (NYSE:PZN), and Barrett Business Services, Inc. (NASDAQ:BBSI). This group of stocks’ market values resemble VECO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KOP | 12 | 40629 | -1 |
| HCCI | 9 | 68760 | -3 |
| PZN | 6 | 18972 | -1 |
| BBSI | 11 | 81420 | -2 |
| Average | 9.5 | 52445 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $147 million in VECO’s case. Koppers Holdings Inc. (NYSE:KOP) is the most popular stock in this table. On the other hand Pzena Investment Management Inc (NYSE:PZN) is the least popular one with only 6 bullish hedge fund positions. Veeco Instruments Inc. (NASDAQ:VECO) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately VECO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on VECO were disappointed as the stock returned -4.4% during the third quarter 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.
