Is Veeva Systems Inc (VEEV) A Good Investment?

Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index returned about 5.2% during the last 12 months ending October 30th. Less than 49% of the stocks in the index outperformed the index. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 30 S&P 500 stocks among hedge funds at the end of September 2014 had an average return of 9.5% during the same period. Sixty three percent of these 30 stocks outperformed the market. Hedge funds had bad stock picks like everyone else. Micron, which lost 50% over this period, was one of hedge funds’ 30 favorite S&P 500 stocks. Anadarko Petroleum was another failed stock pick which lost more than 26%. So, taking cues from hedge funds isn’t a foolproof strategy, but it seems to work on average. In this article, we will take a look at what hedge funds think about Veeva Systems Inc (NYSE:VEEV).

Veeva Systems shareholders have witnessed an increase in hedge fund sentiment recently as the number of funds with long positions went up to 16 from 14. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as ViaSat, Inc. (NASDAQ:VSAT), Hawaiian Electric Industries, Inc. (NYSE:HE), and Inovalon Holdings Inc (NASDAQ:INOV) to gather more data points.

To the average investor, there are tons of indicators that market participants put to use to analyze publicly traded companies. Two of the most underrated indicators are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the elite money managers can outclass their index-focused peers by a significant amount (see the details here).

Keeping this in mind, let’s take a look at the new action surrounding Veeva Systems Inc (NYSE:VEEV).

How are hedge funds trading Veeva Systems Inc (NYSE:VEEV)?

At Q3’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the second quarter. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Christopher Lyle’s SCGE Management has the biggest position in Veeva Systems Inc (NYSE:VEEV), worth close to $32.8 million, accounting for 5.3% of its total 13F portfolio. The second largest stake is held by Dorsal Capital Management, managed by Ryan Frick and Oliver Evans, which holds a $19.9 million position; 1.8% of its 13F portfolio is allocated to the company. Other peers with similar optimism comprise Jim Simons’s Renaissance Technologies, Joel Greenblatt’s Gotham Asset Management and Lee Munder’s Lee Munder Capital Group.

Now, key money managers have jumped into Veeva Systems Inc (NYSE:VEEV) headfirst. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, established the biggest position in Veeva Systems Inc (NYSE:VEEV). Polar Capital had $4.2 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $1.8 million position during the quarter. The other funds with new positions in the stock are Matthew Tewksbury’s Stevens Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Veeva Systems Inc (NYSE:VEEV) but similarly valued. These stocks are ViaSat, Inc. (NASDAQ:VSAT), Hawaiian Electric Industries, Inc. (NYSE:HE), Inovalon Holdings Inc (NASDAQ:INOV), and Royal Gold, Inc (USA) (NASDAQ:RGLD). This group of stocks’ market valuations are similar to VEEV’s market valuation.

As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $496 million, higher than the $110 million figure in VEEV’s case. Royal Gold, Inc (USA) (NASDAQ:RGLD) is the most popular stock in this table with 25 long positions, as opposed to Inovalon Holdings Inc (NASDAQ:INOV), which is the least popular one with only 6 funds holding shares. Veeva Systems Inc (NYSE:VEEV) 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. In this regard RGLD might be a better candidate to consider a long position.