In this article we are going to use hedge fund sentiment as a tool and determine whether Verra Mobility Corporation (NASDAQ:VRRM) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is VRRM a good stock to buy? Verra Mobility Corporation (NASDAQ:VRRM) investors should be aware of an increase in support from the world’s most elite money managers in recent months. Verra Mobility Corporation (NASDAQ:VRRM) was in 22 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 33. Our calculations also showed that VRRM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jeffrey Ubben of Inclusive Capital Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. Keeping this in mind let’s take a glance at the fresh hedge fund action surrounding Verra Mobility Corporation (NASDAQ:VRRM).
Do Hedge Funds Think VRRM Is A Good Stock To Buy Now?
At the end of June, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from one quarter earlier. By comparison, 25 hedge funds held shares or bullish call options in VRRM a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
More specifically, Inclusive Capital was the largest shareholder of Verra Mobility Corporation (NASDAQ:VRRM), with a stake worth $109.1 million reported as of the end of June. Trailing Inclusive Capital was Scopia Capital, which amassed a stake valued at $104 million. Tremblant Capital, Crescent Park Management, and Sunriver Management 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 Scopia Capital allocated the biggest weight to Verra Mobility Corporation (NASDAQ:VRRM), around 14.11% of its 13F portfolio. Inclusive Capital is also relatively very bullish on the stock, earmarking 10.11 percent of its 13F equity portfolio to VRRM.
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Sunriver Management, managed by Will Cook, assembled the most outsized position in Verra Mobility Corporation (NASDAQ:VRRM). Sunriver Management had $15.8 million invested in the company at the end of the quarter. Ian Simm’s Impax Asset Management also initiated a $8.4 million position during the quarter. The other funds with brand new VRRM positions are Paul Tudor Jones’s Tudor Investment Corp, Karim Abbadi and Edward McBride’s Centiva Capital, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s also examine hedge fund activity in other stocks similar to Verra Mobility Corporation (NASDAQ:VRRM). These stocks are Independent Bank Corp (NASDAQ:INDB), Sally Beauty Holdings, Inc. (NYSE:SBH), Niu Technologies (NASDAQ:NIU), Gibraltar Industries Inc (NASDAQ:ROCK), Instil Bio, Inc. (NASDAQ:TIL), Jack in the Box Inc. (NASDAQ:JACK), and The Buckle, Inc. (NYSE:BKE). This group of stocks’ market caps match VRRM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INDB | 13 | 47935 | 2 |
| SBH | 22 | 143723 | 3 |
| NIU | 13 | 186938 | -1 |
| ROCK | 17 | 82296 | -3 |
| TIL | 14 | 561110 | -7 |
| JACK | 29 | 227139 | -1 |
| BKE | 25 | 196951 | 3 |
| Average | 19 | 206585 | -0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $207 million. That figure was $395 million in VRRM’s case. Jack in the Box Inc. (NASDAQ:JACK) is the most popular stock in this table. On the other hand Independent Bank Corp (NASDAQ:INDB) is the least popular one with only 13 bullish hedge fund positions. Verra Mobility Corporation (NASDAQ:VRRM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VRRM is 57.1. 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 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 October 22nd and beat the market again by 1.6 percentage points. Unfortunately VRRM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on VRRM were disappointed as the stock returned -3.6% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Verra Mobility Corp (NASDAQ:VRRM)
Follow Verra Mobility Corp (NASDAQ:VRRM)
Suggested Articles:
- 10 Best Growth Stocks for the Next 10 Years
- 10 Best App Stocks to Buy Today
- 15 Most Reputable Companies In the World
Disclosure: None. This article was originally published at Insider Monkey.
