Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Vereit Inc (NYSE:VER), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is VER stock a buy? Vereit Inc (NYSE:VER) was in 23 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 44. VER has seen an increase in enthusiasm from smart money in recent months. There were 18 hedge funds in our database with VER positions at the end of the third quarter. Our calculations also showed that VER isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Stuart Zimmer of Zimmer Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s go over the recent hedge fund action regarding Vereit Inc (NYSE:VER).
Do Hedge Funds Think VER Is A Good Stock To Buy Now?
At the end of December, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 28% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VER over the last 22 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Redwood Capital Management was the largest shareholder of Vereit Inc (NYSE:VER), with a stake worth $160.2 million reported as of the end of December. Trailing Redwood Capital Management was Citadel Investment Group, which amassed a stake valued at $140.8 million. Glendon Capital Management, Zimmer Partners, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Glendon Capital Management allocated the biggest weight to Vereit Inc (NYSE:VER), around 19.79% of its 13F portfolio. Redwood Capital Management is also relatively very bullish on the stock, dishing out 9.77 percent of its 13F equity portfolio to VER.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into Vereit Inc (NYSE:VER) headfirst. Gillson Capital, managed by Daniel Johnson, created the largest position in Vereit Inc (NYSE:VER). Gillson Capital had $19.1 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also initiated a $13.8 million position during the quarter. The other funds with brand new VER positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Paul Tudor Jones’s Tudor Investment Corp, and Greg Eisner’s Engineers Gate Manager.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Vereit Inc (NYSE:VER) but similarly valued. We will take a look at Omega Healthcare Investors Inc (NYSE:OHI), Encompass Health Corporation (NYSE:EHC), Companhia Siderurgica Nacional (NYSE:SID), Owens Corning (NYSE:OC), Gold Fields Limited (NYSE:GFI), Ciena Corporation (NASDAQ:CIEN), and Vedanta Ltd (NYSE:VEDL). This group of stocks’ market valuations are closest to VER’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OHI | 15 | 101266 | -4 |
| EHC | 35 | 758170 | 3 |
| SID | 9 | 43048 | 2 |
| OC | 38 | 377647 | -5 |
| GFI | 15 | 367925 | 0 |
| CIEN | 24 | 313610 | -5 |
| VEDL | 10 | 68919 | 1 |
| Average | 20.9 | 290084 | -1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $290 million. That figure was $684 million in VER’s case. Owens Corning (NYSE:OC) is the most popular stock in this table. On the other hand Companhia Siderurgica Nacional (NYSE:SID) is the least popular one with only 9 bullish hedge fund positions. Vereit Inc (NYSE:VER) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VER is 49.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately VER wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on VER were disappointed as the stock returned 9.1% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Vereit Inc. (NYSE:VER)
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Disclosure: None. This article was originally published at Insider Monkey.
