In this article we will check out the progression of hedge fund sentiment towards 21Vianet Group Inc (NASDAQ:VNET) and determine whether it 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.
Is 21Vianet Group Inc (NASDAQ:VNET) worth your attention right now? Prominent investors are becoming less confident. The number of long hedge fund positions decreased by 1 in recent months. Our calculations also showed that VNET isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). VNET was in 15 hedge funds’ portfolios at the end of March. There were 16 hedge funds in our database with VNET positions at the end of the previous quarter.
Video: 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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.
Gifford Combs of Dalton Investments
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. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s check out the fresh hedge fund action regarding 21Vianet Group Inc (NASDAQ:VNET).
How are hedge funds trading 21Vianet Group Inc (NASDAQ:VNET)?
At Q1’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards VNET over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Daniel Patrick Gibson’s Sylebra Capital Management has the most valuable position in 21Vianet Group Inc (NASDAQ:VNET), worth close to $52.6 million, comprising 2.2% of its total 13F portfolio. Coming in second is Josh Resnick of Jericho Capital Asset Management, with a $27.1 million position; 2.2% of its 13F portfolio is allocated to the company. Remaining professional money managers that hold long positions include Renaissance Technologies, Gifford Combs’s Dalton Investments and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Dalton Investments allocated the biggest weight to 21Vianet Group Inc (NASDAQ:VNET), around 8.64% of its 13F portfolio. Jericho Capital Asset Management is also relatively very bullish on the stock, setting aside 2.18 percent of its 13F equity portfolio to VNET.
Because 21Vianet Group Inc (NASDAQ:VNET) has witnessed falling interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of hedgies that slashed their full holdings by the end of the first quarter. It’s worth mentioning that Matthew Moskey and Friedrich Schulte-Hillen’s Athos Capital cut the largest investment of the 750 funds monitored by Insider Monkey, worth an estimated $0.4 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund cut about $0.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 1 funds by the end of the first quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as 21Vianet Group Inc (NASDAQ:VNET) but similarly valued. We will take a look at KAR Auction Services Inc (NYSE:KAR), ForeScout Technologies, Inc. (NASDAQ:FSCT), Kennametal Inc. (NYSE:KMT), and Albany International Corp. (NYSE:AIN). This group of stocks’ market values are closest to VNET’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KAR | 21 | 203698 | -5 |
| FSCT | 33 | 421646 | 12 |
| KMT | 17 | 147627 | -2 |
| AIN | 18 | 51239 | -1 |
| Average | 22.25 | 206053 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $206 million. That figure was $130 million in VNET’s case. ForeScout Technologies, Inc. (NASDAQ:FSCT) is the most popular stock in this table. On the other hand Kennametal Inc. (NYSE:KMT) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks 21Vianet Group Inc (NASDAQ:VNET) is even less popular than KMT. Hedge funds clearly dropped the ball on VNET as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on VNET as the stock returned 75.1% so far in the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
