Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Vereit Inc (NYSE:VER).
Is VER a good stock to buy now? The smart money was getting more optimistic. The number of long hedge fund positions moved up by 4 recently. Vereit Inc (NYSE:VER) was in 27 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 44. Our calculations also showed that VER isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
According to most stock holders, hedge funds are assumed to be underperforming, old investment vehicles of the past. While there are over 8000 funds with their doors open at present, We choose to focus on the upper echelon of this group, approximately 850 funds. It is estimated that this group of investors shepherd bulk of the hedge fund industry’s total asset base, and by shadowing their unrivaled picks, Insider Monkey has unearthed a number of investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Donald Sussman of Paloma Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to take a peek at the recent hedge fund action encompassing Vereit Inc (NYSE:VER).
Do Hedge Funds Think VER Is A Good Stock To Buy Now?
At Q1’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in VER a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Redwood Capital Management held the most valuable stake in Vereit Inc (NYSE:VER), which was worth $163.7 million at the end of the fourth quarter. On the second spot was Glendon Capital Management which amassed $157.4 million worth of shares. Citadel Investment Group, 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 16.49% of its 13F portfolio. Redwood Capital Management is also relatively very bullish on the stock, setting aside 7.97 percent of its 13F equity portfolio to VER.
As aggregate interest increased, key money managers have been driving this bullishness. Waterfront Capital Partners, managed by Eduardo Abush, assembled the most valuable position in Vereit Inc (NYSE:VER). Waterfront Capital Partners had $32.5 million invested in the company at the end of the quarter. Andrew Weiss’s Weiss Asset Management also initiated a $1 million position during the quarter. The following funds were also among the new VER investors: Donald Sussman’s Paloma Partners, Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital), and Bruce Kovner’s Caxton Associates LP.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Vereit Inc (NYSE:VER) but similarly valued. These stocks are Robert Half International Inc. (NYSE:RHI), Natera Inc (NASDAQ:NTRA), Churchill Downs Incorporated (NASDAQ:CHDN), Kingsoft Cloud Holdings Limited (NASDAQ:KC), Alleghany Corporation (NYSE:Y), SEI Investments Company (NASDAQ:SEIC), and Amedisys Inc (NASDAQ:AMED). This group of stocks’ market valuations resemble VER’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RHI | 27 | 284866 | 0 |
| NTRA | 41 | 1222395 | -5 |
| CHDN | 19 | 413255 | -6 |
| KC | 16 | 92226 | -4 |
| Y | 34 | 359891 | 0 |
| SEIC | 27 | 304623 | -6 |
| AMED | 26 | 324073 | 6 |
| Average | 27.1 | 428761 | -2.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.1 hedge funds with bullish positions and the average amount invested in these stocks was $429 million. That figure was $665 million in VER’s case. Natera Inc (NASDAQ:NTRA) is the most popular stock in this table. On the other hand Kingsoft Cloud Holdings Limited (NASDAQ:KC) is the least popular one with only 16 bullish hedge fund positions. Vereit Inc (NYSE:VER) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VER is 49.4. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. A small number of hedge funds were also right about betting on VER as the stock returned 24.6% since the end of the first quarter (through 7/9) and outperformed the market by an even larger margin.
Follow Vereit Inc. (NYSE:VER)
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Disclosure: None. This article was originally published at Insider Monkey.
