Is Verizon Communications Inc. (NYSE:VZ) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Verizon Communications Inc. (NYSE:VZ) investors should pay attention to a decrease in support from the world’s most elite money managers in recent months. VZ was in 52 hedge funds’ portfolios at the end of the first quarter of 2019. There were 62 hedge funds in our database with VZ positions at the end of the previous quarter. Our calculations also showed that VZ isn’t among the 30 most popular stocks among hedge funds.
To most shareholders, hedge funds are assumed to be underperforming, outdated financial vehicles of yesteryear. While there are greater than 8000 funds trading at present, Our experts look at the aristocrats of this group, approximately 750 funds. Most estimates calculate that this group of people command the lion’s share of all hedge funds’ total capital, and by tracking their first-class stock picks, Insider Monkey has formulated numerous investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship hedge fund strategy outperformed the S&P 500 index by around 5 percentage points annually since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
Let’s take a look at the recent hedge fund action encompassing Verizon Communications Inc. (NYSE:VZ).
What does the smart money think about Verizon Communications Inc. (NYSE:VZ)?
At Q1’s end, a total of 52 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VZ over the last 15 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
The largest stake in Verizon Communications Inc. (NYSE:VZ) was held by AQR Capital Management, which reported holding $672.6 million worth of stock at the end of March. It was followed by Adage Capital Management with a $305.7 million position. Other investors bullish on the company included Citadel Investment Group, Point72 Asset Management, and Ariel Investments.
Judging by the fact that Verizon Communications Inc. (NYSE:VZ) has experienced falling interest from hedge fund managers, we can see that there is a sect of fund managers that slashed their full holdings heading into Q3. It’s worth mentioning that Brandon Haley’s Holocene Advisors dropped the biggest investment of all the hedgies watched by Insider Monkey, worth close to $98.6 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund said goodbye to about $43.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 10 funds heading into Q3.
Let’s go over hedge fund activity in other stocks similar to Verizon Communications Inc. (NYSE:VZ). These stocks are Mastercard Incorporated (NYSE:MA), Intel Corporation (NASDAQ:INTC), Cisco Systems, Inc. (NASDAQ:CSCO), and UnitedHealth Group Inc. (NYSE:UNH). This group of stocks’ market valuations are similar to VZ’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MA | 94 | 11561189 | -2 |
| INTC | 62 | 4307809 | -3 |
| CSCO | 45 | 3154180 | -10 |
| UNH | 72 | 6223666 | -10 |
| Average | 68.25 | 6311711 | -6.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 68.25 hedge funds with bullish positions and the average amount invested in these stocks was $6312 million. That figure was $1473 million in VZ’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand Cisco Systems, Inc. (NASDAQ:CSCO) is the least popular one with only 45 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately VZ wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); VZ investors were disappointed as the stock returned -2.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
