Is Vedanta Ltd (ADR) (NYSE:VEDL) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to find the latest market-moving information.
Is Vedanta Ltd (ADR) (NYSE:VDEL) a healthy stock for your portfolio? The best stock pickers are becoming hopeful. The number of long hedge fund positions went up by 5 in recent months. At the end of this article, we will also compare Vedanta Ltd (ADR) (NYSE:VDEL) to other stocks, including Erie Indemnity Company (NASDAQ:ERIE), Sociedad Quimica y Minera de Chile (ADR) (NYSE:SQM), and Bemis Company, Inc. (NYSE:BMS) to get a better sense of its popularity.
To the average investor, there are several indicators that market participants can use to appraise publicly traded companies. Two of the less known indicators are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the top investment managers can trounce the S&P 500 by a significant margin (see the details here).
Keeping this in mind, let’s take a look at the latest action regarding Vedanta Ltd (ADR) (NYSE:VEDL).
How have hedgies been trading Vedanta Ltd (ADR) (NYSE:VEDL)?
Heading into Q4, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a jump of 167% from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Lakewood Capital Management, managed by Anthony Bozza, holds the largest position in Vedanta Ltd (ADR) (NYSE:VEDL). Lakewood Capital Management has a $4 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Israel Englander of Millennium Management, with a $2 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining peers that are bullish contain Jeff Lignelli’s Incline Global Management, D E Shaw, and Matthew Hulsizer’s PEAK6 Capital Management.
As aggregate interest increased, specific money managers were leading the bulls’ herd. Jeff Lignelli’s Incline Global Management initiated a $1.9 million position during the quarter. The other funds with new positions in the stock are Renaissance Technologies, David Costen Haley’s HBK Investments, and John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s check out hedge fund activity in other stocks similar to Vedanta Ltd (ADR) (NYSE:VEDL). These stocks are Erie Indemnity Company (NASDAQ:ERIE), Sociedad Quimica y Minera de Chile (ADR) (NYSE:SQM), Bemis Company, Inc. (NYSE:BMS), and Donaldson Company, Inc. (NYSE:DCI). This group of stocks’ market valuations is closest to Vedanta Ltd (ADR) (NYSE:VDEL)’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ERIE | 10 | 52490 | 2 |
| SQM | 9 | 54299 | -5 |
| BMS | 25 | 198698 | 1 |
| DCI | 22 | 112975 | 7 |
As you can see, these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $105 million. That figure was $10 million in Vedanta Ltd (ADR) (NYSE:VDEL)’s case. Bemis Company, Inc. (NYSE:BMS) is the most popular stock in this table. On the other hand, Sociedad Quimica y Minera de Chile (ADR) (NYSE:SQM) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks, Vedanta Ltd (ADR) (NYSE:VEDL) is even less popular than Sociedad Quimica y Minera de Chile (ADR) (NYSE:SQM). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.
