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 ETF (SPY) lost 13.5% in the fourth quarter. Seven out of 11 industry groups in the S&P 500 Index were down more than 20% from their 52-week highs at the trough of the stock market crash. The average return of a randomly picked stock in the index was even worse. 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 15 most popular S&P 500 stocks among hedge funds not only recouped their Q4 losses but also outperformed the index by more than 3 percentage points. In this article, we will take a look at what hedge funds think about Verizon Communications Inc. (NYSE:VZ).
Is Verizon Communications Inc. (NYSE:VZ) a bargain? Investors who are in the know are becoming more confident. The number of bullish hedge fund positions improved by 11 in recent months. Our calculations also showed that VZ isn’t among the 30 most popular stocks among hedge funds.
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 market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s check out the new hedge fund action surrounding Verizon Communications Inc. (NYSE:VZ).
Hedge fund activity in Verizon Communications Inc. (NYSE:VZ)
At Q4’s end, a total of 62 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the previous quarter. On the other hand, there were a total of 47 hedge funds with a bullish position in VZ a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Verizon Communications Inc. (NYSE:VZ), with a stake worth $642.1 million reported as of the end of September. Trailing AQR Capital Management was Adage Capital Management, which amassed a stake valued at $290.5 million. Citadel Investment Group, Holocene Advisors, and Ariel Investments were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Soros Fund Management, managed by George Soros, assembled the most valuable position in Verizon Communications Inc. (NYSE:VZ). Soros Fund Management had $34.4 million invested in the company at the end of the quarter. James Parsons’s Junto Capital Management also initiated a $33.6 million position during the quarter. The other funds with brand new VZ positions are Andrew Sandler’s Sandler Capital Management, James Crichton’s Hitchwood Capital Management, and Sander Gerber’s Hudson Bay Capital Management.
Let’s check out hedge fund activity in other stocks similar to Verizon Communications Inc. (NYSE:VZ). We will take a look at The Procter & Gamble Company (NYSE:PG), Wells Fargo & Company (NYSE:WFC), Intel Corporation (NASDAQ:INTC), and Mastercard Incorporated (NYSE:MA). This group of stocks’ market caps match VZ’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PG | 60 | 9259931 | 7 |
| WFC | 77 | 25411606 | -2 |
| INTC | 65 | 5188194 | 7 |
| MA | 96 | 9491645 | 1 |
| Average | 74.5 | 12337844 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 74.5 hedge funds with bullish positions and the average amount invested in these stocks was $12338 million. That figure was $1773 million in VZ’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand The Procter & Gamble Company (NYSE:PG) is the least popular one with only 60 bullish hedge fund positions. Verizon Communications Inc. (NYSE:VZ) is not the least popular stock in this group but hedge fund interest is still below average. Overall, hedge funds are relatively bearish on Verizon. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately VZ wasn’t in this group. Hedge funds that bet on VZ were disappointed as the stock returned 4.9% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
