It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. 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) was in 11 hedge funds’ portfolios at the end of the third quarter of 2016. VECO investors should be aware of an increase in activity from the world’s largest hedge funds lately. There were 10 hedge funds in our database with VECO positions at the end of the previous quarter. At the end of this article we will also compare VECO to other stocks including Harsco Corporation (NYSE:HSC), Federal Signal Corporation (NYSE:FSS), and Varonis Systems Inc (NASDAQ:VRNS) to get a better sense of its popularity.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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What does the smart money think about Veeco Instruments Inc. (NASDAQ:VECO)?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, up by 10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in VECO over the last 5 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC has the most valuable position in Veeco Instruments Inc. (NASDAQ:VECO), worth close to $36 million. On First Pacific Advisors LLC’s heels is Fisher Asset Management, led by Ken Fisher, holding a $35.8 million position. Remaining hedge funds and institutional investors that hold long positions encompass Renaissance Technologies, one of the biggest hedge funds in the world, Ken Griffin’s Citadel Investment Group and D. E. Shaw’s D E Shaw. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As industrywide interest jumped, key money managers have been driving this bullishness. Royce & Associates, led by Chuck Royce, assembled the most valuable position in Veeco Instruments Inc. (NASDAQ:VECO). Royce & Associates had $5.4 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.3 million position during the quarter. The only other fund with a new position in the stock is Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Veeco Instruments Inc. (NASDAQ:VECO) but similarly valued. These stocks are Harsco Corporation (NYSE:HSC), Federal Signal Corporation (NYSE:FSS), Varonis Systems Inc (NASDAQ:VRNS), and InfraREIT Inc (NYSE:HIFR). This group of stocks’ market valuations resemble VECO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HSC | 19 | 86982 | 4 |
| FSS | 17 | 83249 | -2 |
| VRNS | 17 | 77160 | 3 |
| HIFR | 12 | 142129 | -4 |
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $133 million in VECO’s case. Harsco Corporation (NYSE:HSC) is the most popular stock in this table. On the other hand InfraREIT Inc (NYSE:HIFR) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Veeco Instruments Inc. (NASDAQ:VECO) is even less popular than HIFR. 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.
Disclosure: None
